Risk-off shift forces AUD/USD toward key supports
|AUD - Australian Dollar
The Australian dollar shifted sharply lower through trade on Wednesday as markets chased losses in a distinct risk-off move. Having tracked sideways through much of the domestic session, the AUD turned downward overnight as equity markets across Europe and the US suffered steep downward corrections on open with the EURO STOXX 50 and S&P 500 down 1.6% and 2% respectively. Fears pharmaceutical manufacturers won’t deliver COVID-19 vaccines as quickly as first thought escalated overnight as the EU urged AstraZeneca to deliver on its roll-out agenda. The AUD tested lows below 0.7650 before pairing losses ahead of the FOMC policy statement. Fed Chair Jerome Powell affirmed the Fed’s current commitment to accommodative monetary policy yet offered some optimism for a faster than anticipated recovery on the back of the vaccine. With few surprises the USD maintained its momentum through the Fed presser, forcing the AUD back toward intraday lows. While the AUD has staved off moves below support at 0.7640, we will be keenly attuned to any signal the current risk-off shift could extend toward 0.76 and 0.7550. With little of note on today’s domestic agenda, the broader narrative will control direction into the North American session where attentions turn to US GDP data. A surprise uptick in annualised growth in the US could help foster expectations for a post COVID-19 recovery as analysts' attentions begin to drift back toward key underlying fundamentals.
Key Movers
The US dollar lead gains through trade on Wednesday buoyed by a broader shift in risk demand. The DXY index advanced four tenths of one percent fueled by a correction in pro-cyclical commodity currencies and broader euro losses. The single currency fell from 1.2160 toward 1.21 following commentary from ECB officials they would closely monitor the recent appreciation against the USD while highlighting the market has significantly underestimated the effects and impact of further rate cuts. The comments suggest the ECB could be prepared to cut rates again in a bid to stave off further euro gains and drive growth through the worst of the pandemic. Fears vaccine roll-outs across Europe will be delayed on the back of production and logistics issues only heightened demand for the USD as the vaccine gap now becomes a key marker in determining currency value and expectations for a post COVID-19 recovery.
Expected Ranges
AUD/USD: 0.7600 - 0.7750 ▼
AUD/EUR: 0.6280 - 0.6420 ▼
GBP/AUD: 1.7680 - 1.8020 ▲
AUD/NZD: 1.0630 - 1.0750 ▼
AUD/CAD: 0.9760 - 0.9850 ▼
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.