Beware of AUD Correction in the Short Term

The Reserve Bank of Australia announces after rate-setting meeting that it keeps the same interest rate as before and continues buying 4 billion dollars bonds per week before mid February, 2022, as the financial market expected before. Whilst, the bank will give up the target of 0.1% bond yield due on April, 2024. So most analysts reckon that it is tenable for the bank to begin to take a hawkish stance in the meeting.

Surprisingly, the Aussie dropped relentlessly instead of jumping under such circumstance. Affected continuously by the pressure from the central policies, the coal futures prices in many regions and even the Europe plummeted. Therefore, AUD is likely to fall, along with a decrease in coal prices. It is estimated that the coal prices dropped entirely due to a correction, after which the prices may rebound from the bottom before another uptrend. So supply still falls short of demand in the energy market. It can‘t be sure that the prices of coal, natural gas and even crude oil have bounced back from the bottom and turned into an uptrend. And the APEC+ members claimed respectively that they wouldn’t cut the oil production. With the approaching of winter in the Northern Hemisphere, the energy for warmth will increase instead of decreasing.

In terms of AUD and other non-US currencies, attention should be paid to the Feds tapering policy after the rate-setting meeting. Whether the policy will be finished within half a year like what Powell said. If the time that the Fed take is not more than half a year, it is sure to be conducive to USD rather than the non-US currencies including AUD. On the contrary, it the time is 9-12 months, it will be favorable for the non-US currencies rather than USD. It is worth noting that the copper futures and iron ore futures keep falling recently, in addition to the sharply correction of coal prices. Therefore. the continuously synchronous correction of copper futures and iron ore futures in the short term is expected to affect the short-period upward momentum of AUD.

In the end, the commodity currencies are stable thanks to the rising oil prices. Hence I believe that CAD is expected to be stronger than NZD. In terms of the NZD, the Reserve Bank of New Zealand will hold a rate-setting meeting on November 24. Before the meeting, the economic data released by the country will be referred to judge the rate hike pressure. Financial market estimates that New Zealand central bank is possible to hike interest rate on November 24. Therefore, November may see a bullish NZD.