The Aussie posted firm gains last week as confidence about a vaccine-driven global recovery led the currencies to their highest levels in. The Australian Dollar is headed toward a 5.1% gain in November, its largest monthly gain since April.
New found demand for higher risk currencies was the main reason for the rally as investors bet on vaccine hopes and while President-elect Joe Biden received approval from the government to begin his transition into the Whitehouse. The Kiwi was also helped by investors scaling back expectations for more policy easing given the risk of surging house prices.
This week, investors expect data on Wednesday will show Australia’s economy has rebounded sharply from its first recession in three decades, according to a Reuters poll.
The pair rose in early trading today after the Reserve Bank of Australia (RBA) delivered its last interest rate decision. The par also reacted to the impressive manufacturing PMI data from China, Australia’s biggest market.
All eyes will also be on the US monthly employment report on December 4, with economists expecting unemployment to dip to 6.8% from 6.9%, but to remain above the 4.5% rate in March, before much of the US economy went into lockdown.
A bad report is likely to put pressure on Congress to pass a new stimulus bill, but that next package is now expected when Biden is sworn in on January 20.
Analysts expect the jobs report to strengthen expectations of a slow down in the US recovery as several states put shutdowns in place to prevent the spread of the virus. Additional monetary stimulus is likely is expected to weigh on US interest rates which should make the Aussie an attractive assets.
The Australian economy has been relatively steady recently. The number of Covid-19 cases has fallen and more companies are back to business. Furthermore, because of Chinese demand, the country’s exports are doing well.
The AUD/USD is also rising as forex traders respond to the strong manufacturing PMI data from China. In a report today, Caixin and Markit said that the manufacturing PMI rose from 53.6 in October to 54.9 in November. That was a better reading than the government’s manufacturing PMI that was released yesterday.
Technically the pair is trading at 0.7355, which is slightly higher than the overnight’s low of 0.7340. The 0.7350 level is a strong support point which is going to be tested today. Currently, the outlook of the Australian dollar is neutral. A additional push above 0.7375 will mean that bulls can be still in control while a shift below yesterday’s low will be bearish for the pair, down to the 0.7300 support.
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