UK-Australia Collaboration Strengthens, US Dollar Seeks Stability

Currency movements were subdued in the aftermath of Christmas, as markets in Australia and New Zealand observed the Boxing Day public holiday. Meanwhile, UK Export Finance (UKEF) and Export Finance Australia (EFA) strengthened their cooperation by signing a Memorandum of Understanding (MoU). This agreement aims to deepen collaboration in crucial areas such as the energy transition, infrastructure, and secure supply chains. The MoU follows their joint financing of the Hai Long Offshore Wind Power Project in Taiwan, marking their largest renewable energy project financings to date. UKEF Chief Executive Tim Reid emphasized the commitment between the UK and Australia to enhance trade and seek new investment opportunities in the Indo-Pacific.

China, on the other hand, announced 2024 import quotas for zero-tariff wool products from New Zealand and Australia, adhering to the terms of their bilateral free trade agreement (FTA). The import quota for Australian wool will increase by 5 percent in 2024, contributing to Australia's wool exports to China, which constitutes 82 percent of the country's total wool exports. The rise in quota aligns with improving diplomatic relations between China and Australia as they work to resolve disputes, including those related to anti-dumping duties on Australian wine.

In Australia, jobseekers express dissatisfaction with the employment system, claiming to be placed in positions with poor hours, conditions, and pay. The economic landscape in 2023 has seen households grappling with a cost-of-living squeeze, driven by high inflation and rising interest rates. The Australian Bureau of Statistics reported a significant 4.3 percent decline in real household disposable income in the year to September 30, the largest drop since the 1980s. To cope, consumers have cut spending on discretionary items like electronics and furniture. Notably, spending on consumer electronics has plummeted by 40 percent over the past six months compared to the same period in 2022.

Rising inflation and interest rates have compelled households to allocate more funds to essentials such as accommodation and fuel. Weekly rental payments have surged by 12 percent over the past six months, while spending on health practitioners has increased by the same margin. Despite the economic challenges, Australians have maintained spending on non-discretionary items like cafes, pubs, and restaurants.

The Reserve Bank of Australia responded to economic pressures by raising interest rates five times in 2023, totaling 13 increases since May 2022. While credit delinquency rates remain relatively low, signs of repayment stress are emerging. The share of personal loan accounts with overdue payments increased by 20 percent in the year to September. Mortgage delinquencies and requests for hardship arrangements have also risen, with those aged 36 to 45 facing the most significant challenges.

The global perspective sees the U.S. dollar seeking stability in thin holiday trade, influenced by indications of cooling inflation in the largest economy. The dollar index hovers near a five-month low, and recent data showing a decline in U.S. prices in November has fueled expectations of a Federal Reserve interest rate cut in March 2024. The Fed's commitment to addressing inflation, coupled with the potential for rate cuts, has influenced the dollar's performance in this period.

Data for Technical Analysis (5H) CFD AUD/USD

Resistance : 0.6811, 0.6815, 0.6823

Support : 0.6795, 0.6791, 0.6783

5H Outlook

Source: Investing.com

Buy/Long 1 If the support at the price range 0.6785 - 0.6795 is touched, but the support at 0.6795 cannot be broken, the TP may be set around 0.6815 and the SL around 0.6780, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 0.6811 - 0.6821, TP may be set around 0.6835 and SL around 0.6790, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 0.6811 - 0.6821 is touched, but the resistance at 0.6811 cannot be broken, the TP may be set around 0.6795 and the SL around 0.6826, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 0.6785 - 0.6795, TP may be set around 0.6783 and SL around 0.6816, or up to the risk appetite.       

Pivot Points Dec 26, 2023 02:17AM GMT

Sources: Investing, Brisbane Times