Blog Details
Australian Dollar Eyes Chinese Manufacturing Data After FAANG Earnings (Jul 31, 2020)
The Dow Jones and S&P 500 index closed 0.85 and 0.38 percent lower, respectively, while the tech-leaning Nasdaq benchmark ended +0.43 percent for the day. Stocks were hit hard after advanced, US GDP data for Q2 showed a 32.9 percent contraction, the fastest on record on an annualized, quarter-on-quarter basis. Having said that, the figure was not as bad as the -34.5 percent estimate.
Personal consumption also took hit at -34.6 percent, though also not as hard as analysts had expected with forecasts of -34.5 percent. Tech giants Facebook, Apple, Amazon, and Google – part of the FAANG group – released better-than-expected earnings and pushed the market cap of these companies over $5 trillion.
the coronavirus pandemic, while devastating the global economy, has arguably been a long-term tailwind for these companies. Their economies of scale allowed them to weather the storm better than their smaller, higher cost-per-unit peers. Furthermore, working-from-home policies have placed greater demand for digital services amid government-enforced lockdown measures. This may help explain the tech sector’s impressive rally.
Foreign exchange markets broadly
reflected a risk-on tilt with the Australian and New Zealand Dollars closing in
the green at the expense of the haven-linked US
Dollar. The petroleum-linked Canadian
Dollar and Norwegian Krone were dragged lower in what appears to
have been a sharp decline in oil prices that rippled out to assets affiliated with
the cycle-sensitive commodity.
Friday’s Asia-Pacific Trading Session
The China-data-sensitive Australian Dollar may extend its rally if the manufacturing and services PMI out of the Asian giant shows a better-than-expected print. Analysts are anticipating prints of 50.8 and 54.5, respectively, above the key 50.00 threshold that distinguishes a contractionary or expansionary outlook among purchasing managers. Jubilance from FAANG earnings may lift the market spirit and amplify AUD’s gains.
AUD/USD Analysis
AUD/USD is showing alarming hesitation as it trades on a proverbial blade’s edge at the lower tier of the 0.7206 to 0.7181 resistance range. The short-bodied nature of the candle hints at an underlying lack of confidence in clearing the upper crust. Consequently, if traders believe that in the short term, there is little room to rise but a lot of space to fall, this turn of sentiment may cast a bearish shadow over AUD/USD.
