The AUDUSD looks ready for new 2020 highs in December as the US Dollar generally reflects an inverse relationship to investor confidence, with the correction from the high (0.7450) providing to be a resistance point in the bullish.
The Aussie this morning has made a move to the upside, as equities in Asia are growing stronger.
On the central banking front, we’ve seen a climb down from the negative rates suggestions and we wonder how long it will be before the RBA backs away from promises to keep rates stable for three years. Recent remarks by RBA Governor Philip Lowe suggest the board will support a wait-and-see approach over the coming months as “the economic news has, on balance, been better than we were expecting,” with the central bank head going onto say that “the focus is now on actual outcomes for inflation and unemployment, rather than forecast outcomes” while testifying in front of the House of Representatives Standing Committee on Economics.
Australia has done very well to tackle the pandemic and now commodities prices are skyrocketing, especially iron ore.
The quarrel with China is a worry in the market but it’s tough to see the relationships truly fracturing. Australia is commodity-rich and China is commodity hungry.
Key market trends may carry on to influence the Aussie Dollar ahead of the next RBA meeting on February 1 as Governor Lowe and Co. admits that “the improvement in risk sentiment has also been associated with a depreciation of the US dollar and an appreciation of the Australian dollar,” and increase in retail sentiment also looks poised to continues as the crowding behavior from earlier this year will appear again.
We remain bullish on the Aussie expecting a test upwards on the 0.7500 price level.
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