Asia-Pacific Markets Outlook for Monday
The week will begin with Asia-Pacific markets looking for direction, but if Friday's Wall Street close is any indicator, prices are poised to continue down. After a non-farm payrolls report that was mostly in line with expectations failed to allay concerns about the Fed raising interest rates, the S&P 500 fell 2.8% on Friday. In September, the US added 263k jobs, and the unemployment rate dropped to 3.5%. Due to a holiday, the US bond markets will be closed on Monday, which could impact liquidity.
During the NY trading session, the policy-sensitive 2-year Yield increased by almost eight basis points. The likelihood of a 75-basis point rate increase at the Federal Reserve meeting later this month has increased among rate traders, with Fed funds futures and overnight index swaps (OIS) now pricing a nearly 100% chance for the higher rate increase. Expectations of a Fed turnaround must wait.
The impending US consumer price index (CPI), which is due on October 13, is currently the center of attention. Analysts anticipate core inflation, which is a stronger indicator of how the Fed will behave, will cross the wires at 6.5% from a year ago, up from the previous month's 6.3%. A stronger-than-expected reading would very certainly result in a 75-bps increase next month and most likely increase the anticipated terminal rate as well.
The risk-sensitive Australian Dollar this week may be affected by the Westpac consumer confidence print. Following the Reserve Bank of Australia's decision to slow down its tightening from its last meeting, the AUD/USD has continued to suffer. Given that the Federal Reserve is prepared to keep raising interest rates at an accelerated clip, that downside is likely to persist.
Technical Outlook for the Australian Dollar
Last week, AUD/USD displayed a bear flag, indicating that prices are likely to continue to decline. In addition, the MACD oscillator became negative beneath its signal line, which is a bearish indication for market movement this week. More downside can be possible if support for the flag is broken.
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