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

Australian Dollar, AUD/USD, Bitcoin, China, Iron Ore, Technical Outlook – Talking Points

• Asia-Pacific markets are facing a risk-off move after US stocks fell on Bitcoin’s massive fall
• China Covid lockdowns spread across key hubs, weighing on AUD and iron ore prices
• AUD/USD fell from its 50-day SMA as a Cup and Handle breakout missed its target

Thursday’s Asia-Pacific Outlook

US stocks fell on Wednesday as the fallout from the failed deal between Binance and FTX plunged crypto markets, sending Bitcoin lower by nearly 15% to its lowest since November 2020. The Wall Street Journal reported that Binance intended to abandon the deal announced yesterday for to buy FTX. Binance confirmed the news on its Twitter handle, citing the company’s due diligence and recent investigations opened by US regulators.

The battle for control of the US House and Senate is still ongoing, but the projected red wave did not materialize. The president’s party almost always loses seats in both chambers in midterm elections. Democrats are slightly favored to retain control of the Senate, but their odds for the House are long. Georgia will hold a runoff in December, potentially keeping the Senate’s fate unknown until then. Still, the chances for fiscal spending will diminish 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.

Shutdowns across China increased as cases mounted, dragging on demand-sensitive crude oil prices. A surprising inventory build-up in the US also weighed on the commodity. China’s Guangzhou, a factory-heavy city of nearly 20 million, ramped up mass testing measures, with more than half the city under restrictions. Despite the situation, Chinese real estate developers rose on Wednesday after the renewal of a credit support program. The Chinese yuan fell 0.5% against the dollar.

Australia’s inflation expectations for November will cross the lines today. AUD/USD fell as iron ore prices fell. Reserve Bank of Australia Deputy Governor Michele Bullock pushed back against claims the central bank was not tough enough on inflation, but it did little to spur efforts to raise interest rates. The Australian dollar’s direction is likely to remain tied to China’s Covid situation in the short term. The upcoming US consumer price index (CPI) is in focus.

Important events for November 10:

• Philippines – GDP growth QoQ (Q3)
• Thailand – Consumer Confidence (Oct)
• Japan – Yearly Machine Tool Orders (Oct)
• China – Vehicle Sales (Oct)

Australian Dollar Technical Outlook

AUD/USD declined from the 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 RSI tracks below the midpoint of the daily time frame.

AUD/USD daily chart

Chart created with TradingView

— Posted by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comment box below or @FxWestwater on Twitter