Home Forex Markets AUD/USD rebounds as dollar dips, focus on Jackson Hole central bank annual meeting

AUD/USD rebounds as dollar dips, focus on Jackson Hole central bank annual meeting

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AUD/USD rebounds as dollar dips, focus on Jackson Hole central bank annual meeting

Chinese stimulus boosts risk assets; AUD/USD rally is expected to fade as the annual Jackson Hole central bank meeting is a potential threat.

Fundamental background of the Australian dollar

The Australian dollar found support after the Chinese government added 1 trillion yuan in stimulus to tackle a fragile property market, supply chains battered by the outbreak and recent power outages in some regions. The move was accompanied by a higher-than-modeled midpoint rate for the dollar against the yuan (USD/CNY), sending a signal that the People’s Bank of China (PBOC) believes the yuan is depreciating against the dollar at an unwelcome pace. . The market responded well to this, with emerging markets (EM) and growth-linked currencies such as the Australian dollar strengthening, and commodities generally rising.

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Chinese 5-year sovereign CDs (credit default swaps, pictured below), a traditional default hedging tool, are trending downward as of this writing, suggesting that Beijing’s efforts to moderate real estate are paying off.

Chinese 5-year sovereign bond CDs chart

Source: Refinitiv

Before the highly anticipated Jackson Hole central bank annual meeting kicks off, the market will also usher in the heavy data from the United States tonight, the revised GDP report (as shown in the figure below). This quarterly revision of the GDP deflator is likely to be more influential as inflation remains at the heart of the Fed’s agenda.

AUD/USD rebounds as dollar dips, focus on Jackson Hole central bank annual meeting

Source: DailyFX Economic Calendar

AUD/USD trend technical analysis

AUD/USD rebounds as dollar dips, focus on Jackson Hole central bank annual meeting

Graphic by Warren Venketas via IG platform

On the daily chart, AUD/USD bulls appear to be struggling to push the pair towards the important psychological 0.7000 resistance zone, but ahead of the Jackson Hole central bank meeting, I don’t think bulls can achieve that. The market is still hesitant, and with the opening of the European and American trading hours, the short-term rebound is expected to be interrupted soon.

Important resistance levels to watch

0.7000/100-day EMA (yellow)

Important Support Levels to Watch

20-day (purple)/50-day EMA (blue)

IG Client Sentiment Indicator: Bullish AUD/USD

The IG Client Sentiment Indicator shows that retail investors are bullish on AUD/USD, with 59% of retail investors holding long positions on AUD/USD. At DailyFX, the IG Client Sentiment Indicator is often seen as a contrarian indicator, with retail bullishness implying that AUD/USD could fall. However, combined with the recent changes in long and short positions, even if retail investors are bullish, AUD/USD is still expected to rise in the short term. (Translated by Lisa by Warren Venketas)

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