Asia Pacific Market Open Talking Points

US Dollar shrugs off news Treasury is holding off USD intervention “for now”

British Pound sunk as UK PM received greenlight on suspending Parliament

Australian Dollar may rise if local private capital expenditures surprises up

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US Dollar Shrugs off Treasury Announcement Deferring Currency Intervention

The US Dollar shrugged off an announcement from Treasury Secretary Steven Mnuchin that the country does not intend to intervene on USD “for now”. US President Donald Trump has long made the public aware of his distaste for a stronger Greenback. The currency has been outperforming its major counterparts this year despite bets of easing from the Fed, likely owing to its status as a haven amid trade wars.

What is under “serious consideration” by Mr Mnuchin are plans to expand the portfolio of long-term bond offerings. Earlier this month, the Treasury was looking into 50 and 100-year bonds. Following today’s announcement, the 30-year government bond yield climbed. It remains to be seen whether direct intervention to weaken the world’s most-liquid currency occurs down the road.

British Pound Sinks as UK Prime Minister Suspends Parliament

Meanwhile, the British Pound underperformed against its major counterparts on the latest Brexit developments. Overnight, UK Prime Minister Boris Johnson received permission from the Queen to suspend Parliament. This is also known as prorogation and it effectively decreases the time members of parliament have to debate the withdrawal process, increasing the likelihood of a “no-deal” Brexit.

Thursday’s Asia Pacific Trading Session

It was a mixed bag for risk trends over the past 24 hours. While Wall Street ended the day higher, the S&P 500 remains within a directionless range between 2820 and 2947 since early August. Continued uncertainty over the US-China trade war is one likely cause. There have been disputes from China over whether the phone call with Trump regarding restarting talks occurred at the G7 Summit in France.

S&P 500 futures are now pointing cautiously lower heading into Thursday’s Asia Pacific trading, perhaps limiting the scope for upside follow-through in regional bourses. The pro-risk Australian Dollar will be closely watching local private capital expenditure data. Data out of Australia has been tending to outperform relative to economists’ expectations as of late. An upside surprise may cool near-term RBA rate cut bets, boosting AUD.

Australian Dollar Technical Analysis

Taking a closer look at AUD/USD, the currency pair is once again attempting to find follow-through after closing under the March 2009 low. Positive RSI divergence is still present and indicates fading downside momentum. A confirmatory close under 0.6708 opens the door to extending the dominant downtrend. A turn higher on the other hand places resistance at 0.6827.

AUD/USD Daily Chart

Chart Created in TradingView

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--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter