- AUD / USD has rallied to hit new highs for the day at 0.7329, attracting buying interest at 0.7300.
- The Aussie is trading near monthly highs and remains buttressed amid risk appetite conditions / mild USD conditions.
- AUD / USD is targeting a third attempt to break above its recent range at 0.7339.
The strength of risk-sensitive currencies such as AUD, NZD and CAD against the USD in recent trading has driven the AUD/USD back to near the day’s highs above 0.7325, and the pair is now posting gains of around 30 pips on the day or 0.4%. .
AUD benefits amid risk appetite flows / mild USD conditions
Global equity and crude oil markets are trading mostly higher on Wednesday, as are bond yields on both sides of the Atlantic, amid a broad improvement in risk appetite that also benefits more sensitive currencies. risk (including AUD).
Aside from a small risk in the pop that was unleashed in the middle of Wednesday’s European session after receiving more information from Pfizer about its vaccine (Phase 3 trials now show a 95% effectiveness rate and the company is pushing for obtain authorization immediately), no other holder or specific subject of the market can do it. point out why risk appetite has improved; Market participants continue to weigh the implications of recent vaccine updates, the worsening pandemic in the Northern Hemisphere as winter approaches, the increasingly dovish tone of the world’s major central banks, and the aftermath of the attacks. American elections.
Thus, most US and European stock indices are trading at or near recent highs, as are crude oil markets. Risk sensitive USD pairs are no different, benefiting this week from a gradual deterioration in appetite for the USD.
The USD seems to have lost its safe haven status somewhat in recent days; The vaccine news appears to have helped the USD in the short term due to the rise in US Treasury yields. But it is likely that many participants agree that news of the vaccine and the end of the associated pandemic faster than expected (which will be very positive for emerging markets and risk-sensitive FX) will, in the end, be a negative dollar.
Some argue that the market is underestimating the short-term risks presented by the continued spread of the virus in the US over the past few weeks, prompting states, one by one, to return to some form of lockdown. Shouldn’t this be bullish for the dollar as a safe haven?
Perhaps not, given that the Eurozone (which has already returned to lockdown) is seeing its virus numbers stabilize and major Asian economies such as China and Japan appear to have kept the virus relatively well under wraps. The Chinese economy has already had one of the best results in the world in 2020 and looks set to continue into 2021, while the eurozone, while suffering at the moment, could be bracing for a stronger first quarter of 2021 if it can control the numbers of virus. By Christmas, while US Covid-19 deaths continue to rise in the US, this could undermine the USD against JPY, CNY and EUR in the future.
Meanwhile, FOMC members, including President Powell and Vice President Clarida, have been increasingly pessimistic about the short-term outlook for the US economy due to lockdowns amid mounting Covid-19 cases. With some members hinting that the Fed’s ongoing unconventional refinancing programs could be increased, as well as the QE buyout rate reassessed, the tone of events this week has been unmistakably subdued.
The AUD could be one of the best beneficiaries amid softer USD conditions going forward; Australia is largely Covid-19 free, as is China, its most important trading partner. Meanwhile, the RBA is essentially now signaling that it has finished easing. The AUD is already up 4.2% on the month against the USD and is one of the best monthly results in the G10.
The AUD is likely to continue to gain in the future as long as risk appetite remains bullish and the USD on the defensive.
AUD / USD retreating to the top of the recent week’s range
Since November 5, AUD / USD has traded within a range of 0.7221-0.7339. After failing to break above this range on Tuesday, and reversing to lows around the midpoint of this range at 0.7270, the pair has made decent gains to the upside today and is considering a third attempt to break above resistance at the 0.7339 level.
4 hour chart
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