Xe Morning Update - Your daily market wrap

Developments in markets for Friday 07 November......

• Snapshot: S&P500/Nasdaq?? yields??, crude oil??, gold??US dollar??
• AUD/USD:??support appearing in the 0.6460's, ends week in the 0.6490's
• AUD WoW?: NZD:+0.93%, USD: -0.79%, GBP: -0.84%, EUR: -1.06%, JPY: -1.16%
• Risk mood improves through U.S. trade on hopes shutdown will end this week
• U.S. equity markets erase steep losses to end the session close to flat
• Week ahead: US CPI unlikely to be released; key week for UK data

Each morning we bring you up to speed with the latest market news, including the events and themes that are impacting currencies and other related asset classes......

Willingness for senate Republicans and Democrats to engage in negotiations to end the government shutdown led to a positive risk reversal through Friday's U.S. session, the three major U.S. equity markets rebounding from steep losses to end the session close to flat. Weighed down by deteriorating risk sentiment as market participants questioned the sustainability of the AI CAPEX induced bull market, the Nasdaq logged its largest weekly decline since early April when Trump's reciprocal tariff announcements on Liberation Day sent equity markets across the globe into a tailspin.
 
Risk sensitive currencies were notable laggards throughout the week, the Australian dollar the second worst performer amongst the G10 cohort, logging a week-on-week decline of around three-quarters-of-a-percent. The Aussie has been faced notable headwinds over the past fortnight, weighed down by doubts the Fed will deliver a December cut, and more broadly negative risk sentiment.
 
As October drew to a close, AUD/USD looked well placed to regain a foothold above 66 US cents whilst attempting a topside breakout of major resistance located at 0.6630. Over the 8 trading days that followed, the Aussie dollar retraced close to two-and-a-half percent marking last week's lows, midweek, a pip or so south of 0.6460. Selling momentum evaporated over the final two days of the week, AUD bears unwilling to push the pair below the 0.6460's.

US equity markets as at time of morning update release and may not represent session closing prices  

As the new week commences, it's important to keep an eye on both the 100- and 200-day moving averages, the former located above, near 0.6540 whilst the latter ended last week ascending near 0.6450. The final three days of last week formed higher intraday lows, suggesting the widely observed 200d MA may remain untested this week. Attention then shifts to the upside should AUD/USD commence the week on a positive footing.
 
Before testing the 100-day moving average, AUD/USD must navigate a 0.6510/30 resistance zone that capped the Aussie's upside throughout the second half of October.
 
Looking to the week ahead, the U.S. data drought may end should House Democrats and Republicans reach a series of agreements to end the shutdown. CPI for October is scheduled to be released Thursday but is a longshot to proceed given the data must still be compiled and rescheduled.
 
A busy week for tier 1 UK data serves up jobs numbers and the preliminary reading on the September quarter GDP. Softer-than-expected outcomes would tip the scales in favour of the BoE opting for a December rate cut. Other data releases of note include the RBNZ's inflation expectations, the Aussie employment report and industrial production and retail sales for China.
 
If U.S, equity markets remain under pressure this week, the Aussie likely struggles to regain a foothold above 65 US cents. Conversely, dip buyers may be emboldened should the longest U.S. government shut down on record end, ending the pullback for U.S. stocks…..the Aussie potentially benefiting from improving risk sentiment.
 
Have a great week!
Stuart Talman (stuart.talman@xe.com)
Xe Corporate

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