AUD : Low Sentiment

(Tue, 8 Dec 2020). The Dow Jones Industrial Average fell 0.49% on Monday as another wave of lockdowns amid rising Covid cases across the U.S. rattled investors. Losses were more tempered in the S&P 500 and Russell 2000 with 0.19% and 0.06% drops, respectively. Still, the tech-heavy Nasdaq 100 index managed to defy broader sentiment, gaining 0.54%.

Vaccine headlines have bolstered sentiment since early November even amid rising Covid cases. However, those cases are now translating into what looks like a huge economic cost for the United States. California, the largest economy in the U.S., now has over 20 million residents under lockdown orders as hospitals across the state come under severe strain.

Sentiment now likely hinges on stimulus talks in Congress. Lawmakers have hit a stalemate since passing relief measures earlier this year. Now, amid a sharp rise in Covid cases and impending economic implications, bets for bipartisan agreement have come to a high point. A breakdown in talks may see a further drop in market sentiment given the recent bullish run.

TUESDAY’S ASIA-PACIFIC OUTLOOK

Monday’s session saw stock indexes across the Asia-Pacific region finish mostly in the green. Tuesday’s one appears at risk from the broader bearish overtones seen in the U.S. The sentiment-linked Australian Dollar is showing weakness against most major FX currencies. AUD/USD is breaching below its recently broken 2020 high as it aims for a third day of losses.

Japan released better than expected news earlier as annualized GDP growth for Q3 crossed the wires at 22.9% versus 21.5% expected, according to the DailyFX Economic Calendar. Australia saw its November NAB Business Confidence rise to 9 points from 2 prior. The upbeat prints don’t appear to be having a material effect on sentiment. Traders will likely keep focus on the Covid situation, especially in the United States as Congress mulls over an aid package.

AUD/NZD TECHNICAL OUTLOOK

The Australian Dollar has traded lower against the New Zealand Dollar since August, and AUD/NZD may have further to drop as its technical outlook deteriorates further. As I pointed out last week, AUD/NZD appeared on pace to form a Death Cross. The bearish technical signal has now completed, and it may weigh on the pair further in the coming days and weeks.

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