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AUD/USD falls alongside iron ore and bitcoin as China ramps up lockdown measures

Asia-Pacific markets face a risk-off move after US stocks slip on bitcoin’s massive drop; China Covid lockdowns spread across key hubs, weighing on AUD and iron ore prices and AUD/USD fell from its 50-day SMA.

Source: Bloomberg

Thursday’s Asia-Pacific outlook

  • The US

US stocks fell on Wednesday as fallout from the failed deal between Binance and FTX roiled crypto markets, sending Bitcoin lower by nearly 15% to the lowest since November 2020. The Wall Street Journal reported that Binance intended to abandon the deal announced yesterday to acquire FTX.

Binance confirmed the news on its Twitter handle, citing corporate due diligence and recent investigations opened by US regulators.

The battle for control of the US House and Senate remains underway, but the projected red wave failed to materialize. The President’s party almost always loses seats in midterm elections. Democrats are slightly favored to retain Senate control, but their odds for the House are slim. Georgia will head to a run-off in December, potentially keeping the Senate’s fate unknown until then.

Still, the chances for fiscal spending will decline unless Democrats pull off a big surprise in the remaining House races. Treasury yields fell across the curve as bond investors moved into the market.

  • China

Lockdowns across China increased as cases rose, which dragged on demand-sensitive crude oil prices.

A surprise inventory build in the US also weighed on the commodity. China’s Guangzhou, a factory-heavy city of nearly 20 million, increased mass testing measures, with over half of the city under restrictions.

Despite the situation, Chinese property developers surged on Wednesday after the renewal of a credit support program. The Chinese yuan fell 0.5% against the dollar.

  • Australia

Australia’s inflation expectations for November will cross the wires today. AUD/USD fell as Iron Ore prices slipped. The Reserve Bank of Australia Deputy Governor Michele Bullock pushed back against claims that the central bank wasn’t being tough enough on inflation, but it didn’t do much to spur rate hike bets.

The Australian dollar’s direction will likely remain tied to China’s Covid situation over the short term.

Notable events for November 10:

  • Philippines – GDP Growth Rate QoQ (Q3)
  • Thailand – Consumer Confidence (Oct)
  • Japan – Machine Tool Orders YoY (Oct)
  • China – Vehicle Sales (Oct)

Australian dollar technical outlook

AUD/USD fell from its 50-day Simple Moving Average (SMA), which coincides with the Cup and Handle pattern’s handle top. Further downside is likely on the table as the Relative Strength Index tracks below its midpoint on the daily timeframe.

AUD/USD daily chart

Source: TradingView

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This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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