Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Greenback weaker as Fed decision looms
The AUD/USD reached the highest level since 3 December overnight as the US dollar extended declines ahead of tonight’s all-important Federal Reserve decision.
The US Fed is expected to hold rates steady at 4.25% to 4.50% but any sign of potential cuts in the future might see the US dollar fall further. The Fed decision is due at 4.00am AEST.
The US dollar has fallen this week, especially in Asia, with sharp losses versus the Taiwanese and Hong Kong dollars most notable.
The AUD/USD gained 0.5% to reach five-month highs.
The kiwi was also higher with the NZD/USD up 0.7% as it moved back towards 0.6000.
In Asia, the USD/SGD fell 0.1% while USD/JPY lost 0.9%.
China’s Caixin services PMI misses
Chinese Caixin servies PMI for April was 50.7, which was significantly lower than the 51.8 forecast and following 51.9 the previous month.
“Disruptions to goods trade amid fresh tariffs had negatively impacted some service providers in April, according to anecdotal evidence, and led to the slowest rise in overall new work for 28 months”, according to the Caixin research.
Additionally, service provider optimism fell to the second-lowest level ever recorded.
The composite PMI was 51.1 instead of 51.8.
USDCNH has rebounded and is now on track to test next daily key resistance levels of 200-day EMA of 7.2550, followed by 21-day EMA of 7.2715.
Hong Kong buys USD to defend peg
According to Hong Kong officials yesterday, they kept buying US dollars in an effort to support the foreign exchange peg.
After the city’s currency tested the upper limit of its trading range on Tuesday in Asia, the Hong Kong Monetary Authority posted a notice stating that it had spent a record HK$60.5 billion on the US dollar.
The recurrent intervention coincides with a surge in Asian currencies (see chart) due to a declining value of the US dollar and indications that the US government is about to sever trade and tariff agreements with important allies.
Next key resistance levels for USD/HKD pair lies with 21-day EMA of 7.7588, 50-day EMA of 7.7657 and 200-day EMA of 7.7801.
The drop lower in the USD/HKD provides the opportunity for USD buyers to take action at the best level in five years.
Aussie at highs ahead of Fed
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 5 – 10 May
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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