Equities Continue to Slide, AUD Slides on RBA Minutes

Markets Continue to Trade in a “Risk-off” Fashion

The dollar traded mixed against the other G10 currencies on Monday and during the Asian morning Tuesday. It gained against AUD, NZD, and JPY in that order, while it underperformed versus CHF, EUR, NOK, SEK and GBP. The greenback was found virtually unchanged against CAD.

Nikkei 225 — Technical Outlook

Nikkei 225 is still trading above a short-term upside support line taken from the low of September 21 st, despite declining recently. The slide happened after the price tested the area near the 23737 hurdle, which is the current highest point of October. Although the current trend is still to the upside, in order to examine higher levels, we would need to wait for a pop above that 23737 barrier first. Until then, we will take a cautiously-bullish stance.

RBA Minutes Reveal Discussion Over a Rate Cut

Now, back to the currencies, the Aussie was the main loser, coming under strong selling interest after the minutes from the latest RBA meeting revealed that officials discussed cutting rates and buying longer-dated debt as means to support the economy. Following similar remarks by Governor Philip Lowe, this suggests that other members also share the same view, which increases the chances for additional easing at the upcoming gathering, scheduled for November 3rd. According to the ASX 30-day interbank cash rate futures yield curve, there is a 74% chance for interest rates to be cut to zero at the upcoming gathering. Market chatter suggests that rates could be cut to 0.10%, a move that is more than fully priced in.

AUD/CAD — Technical Outlook

AUD/CAD continues to trade below a short-term tentative downside resistance line drawn from the high of September 21 st. Even though the pair could rebound somewhat, as long as the rate stays below that downside line, the current trend might remain to the downside. Hence our bearish approach for now.

As for Today’s Events

Tuesday appears to be a relatively light day in terms of economic indicators and releases. We have the US building permits and housing starts for September, both of which are expected to have increased somewhat.

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