Will the COVID-19 virus epidemic impact the global economy? AUD/USD hits 11-year low!
On Monday (February 24), due to the spread of the COVID-19 virus in South Korea, Japan, Iran , and Italy, the market was worried that the global economy was facing an impact. The International Monetary Fund (IMF) announced last Saturday (February 24) 22) The global economic growth forecast for 2020 was lowered by 0.1 percentage points to 3.2% from the time. At the same time, WHO Director-General Tedros Adhanom Ghebreyesus also expressed concerns about the spread of the virus epidemic around the world, saying that the window of opportunity is shrinking and it is necessary to Act quickly before it shuts down completely.
From the perspective of capital flows, market funds are currently flowing into assets such as gold and the U.S. dollar to seek safe havens. Gold benefited from this Monday (February 24) by jumping short and opening high to $1,659.7, and then further climbed to a seven-year high. 1,681.5 US dollars, a new high in more than seven years; as a low-interest currency, the Australian dollar fell under pressure. The Australian dollar/US dollar further set an 11-year low of 0.6583 on Monday (February 24), but then recovered to consolidate above 0.6600.
In fact, although the global economy is facing the impact of the risk of the virus epidemic, China, which has close relations with Australia, is getting rid of the impact of the epidemic. As China takes a series of positive measures, companies are gradually resuming work, which provides support for the Australian dollar to stabilize at 0.6600.
The Reserve Bank of Australia may cut interest rates again in April, but the exchange rate trend still needs to pay attention to possible changes in U.S. monetary policy.
It is worth noting that a series of unfavorable factors in recent times are increasing market expectations for another interest rate cut by the Reserve Bank of Australia this year. The employment change in Australia announced on Thursday (February 20) increased by 13,500 in January, which was better than the expected increase of 10,000. However, the unemployment rate unexpectedly rose to 5.3%, higher than the expected 5.2%. In addition, the public sector wage growth hit 1997 The slowest pace since 2009. Once there is more evidence that the Australian labor market cannot maintain its strength, this may cause Australian inflation to continue its weak trend.
The current market expectation is that the Reserve Bank of Australia will cut the cash rate again from 0.75% to 0.50% in April, and will issue a dovish statement at the March monetary policy meeting to pave the way for future interest rate cuts, and the exchange rate of the Australian dollar also seems to be to a certain extent It has reflected the Reserve Bank of Australia's expectation of future interest rate cuts.
However, this does not mean that the Australian dollar/US dollar will fall sharply, because the difference in monetary policies between Australia and the United States is expected to narrow. Judging from the U.S. manufacturing data released last Friday (February 21), the U.S. economy in 2020 is not optimistic. The preliminary value of the U.S. manufacturing industry in February Markit dropped to 50.8, which was lower than the expected 51.5, mainly because the growth of new orders almost stagnated. .
The problem in the service industry seems to be more serious. The preliminary value of the Markit service industry purchasing managers index in the United States fell to 49.4 in February, which was lower than the expected 53.5. It was the first time since February 2016 that it fell below the 50 level. Due to the impact of the virus epidemic Tourism, exports; the preliminary value of the US Markit comprehensive PMI in February fell to the lowest level since 2013.
It is true that the U.S. PMI released last Friday reflected the impact of the virus epidemic on the U.S. economy. After the data was released, the three major U.S. stock indexes generally fell, while the U.S. ten-year Treasury bond yield fell further to 1.439%, which is 1.439% since September 2019. The three-year low of 1.429% set on the 3rd is only one step away.
U.S. ten-year Treasury bond yield
If more subsequent data shows that the U.S. economy has been affected by the epidemic, the market's rising expectations for the Federal Reserve to cut interest rates will narrow the difference in monetary policy between Australia and the United States, thereby providing rebound momentum for the Australian dollar/US dollar.
In addition, the U.S. dollar index fell significantly after being blocked by the key resistance area of 99.50-100.00 above, which may mean that the U.S. dollar index has limited further upward space in the future. If the U.S. dollar index rebounds again and is blocked by resistance in this area, we need to be wary of a mid-term correction in the U.S. index.
U.S. Dollar Index 4-hour chart
Investors need to focus on the speeches of Federal Reserve officials this week, and the revised annualized quarterly rate of real GDP in the fourth quarter of the United States, the fourth quarter of the United States, will be released on Thursday (February 27). The revised annualized quarterly rate of the core PCE price index, the annual rate of the PCE price index in January in the United States on Friday (February 28), and the Chicago PMI in December in the United States also need to be focused on, and are expected to affect the exchange rate trend.
AUD/USD market outlook: Stabilizing at 0.6600 and facing a short-term rebound, pay attention to the resistance at 0.6680!
AUD/USD 1 hour chart
There is no doubt that in the medium term, the AUD/USD decline has not seen an obvious end signal, which means that in the long term there is still room for further downside in the AUD/USD. However, in the short term, the AUD/USD repeatedly stabilizing the 0.6600 level seems to be a hope for bulls to usher in a short-term rebound. After experiencing continuous declines, the AUD/USD has the need to rebound to challenge the 0.6680 level. If
fails to effectively break through 0.6680, it can further drop to the 0.6500 level in the mid-term. However, once the AUD/USD successfully recovers 0.6700, we need to be alert to the possibility of a mid-term trend reversal.
(Editor in charge: Xu Yue)
Source: Huitong.com
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