Australian Dollar, AUD/USD, Coronavirus, FAANG Earnings – TALKING POINTS

  • QoQ US GDP data printed worst annualized contraction on record
  • FAANG earnings pushed stocks higher, reinforced bullish tech rally
  • AUD/USD teetering at critical resistance could precede tilting over

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 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 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 an underlying lack of confidence of 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.

AUD/USD – Daily Chart

Chart showing AUD/USD

AUD/USD chart created using TradingView

— Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitriTwitter





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