AUD/USD breaks shackles and extends beyond 0.74 US cents

AUD - Australian Dollar

The Australian dollar extended beyond 0.74 US cents through trade on Thursday as investors continued to chase equities, commodity currencies and risk assets higher amid sustained positive sentiment and risk demand. The S&P 500 and Nasdaq extended gains to record new highs throughout the US session, dragging the AUD above resistance at 0.7410/0.7420 to mark intraday highs at 0.7448. The AUD continues to enjoy a series of higher highs and higher lows, spurred by a positive shift in demand for risk, amid hopes a vaccine will see any Q4 retracement unwound throughout 2021. Having broken above the September 2nd high at 0.7410, the AUD is now poised to make a run toward the psychological 0.75 cent barrier. While upside gains may be harder won in the short term as COVD-19 headwinds still linger in the minds of investors, there is little scope to suggest the long run US dollar downturn will correct itself.

With little of note available on today’s domestic docket, our attentions turn to the broader risk narrative and US non-farm payroll numbers. COVID-19 relief talks continue, with house leader Pelosi and senate leader McConnell locked in negotiations over the size and scope of fiscal support. Having shifted off 0.7450, we expect the AUD will trade between 0.7370 and 0.7460 into the weekly close, amid reports Pfizer has been forced to cut its vaccine rollout on the back of supply chain problems.

Key Movers

The US dollar plunged to mark a new two and a half year low on Thursday as investors maintain demand for risk assets amid a sustained surge in positive sentiment. Despite reports Pfizers initial vaccine rollout may be cut short thanks to supply chain issues, markets remain relatively optimistic that widespread immunisation will be available through H1 next year. The Dollar index fell through 91 to touch its lowest level since April 2018 at 90.504. Dollar bears continue to dominate direction as markets anticipate a rapid recovery through 2021.

The euro continued the weeks gains, pushing toward 1.2150 despite calls for the ECB to step in and defend the currency from a rapid depreciation that could derail the recovery. The ECB has flagged it will provide further stimulus to help the Eurozone through the pandemic and our attentions turn to the December 10 meeting for any comment on the recent euro uptick.

The Great British pound was unable to capitalise on broader USD weakness, giving up early gains toward 1.35 amid headlines Brexit talks again failed to move pass key sticking points. The EU is reported to have introduced new mechanisms making it easier to enforce and police a trade agreement after the UK broke trust and international law in breaching the internal market bill. With time fast running out to ratify an agreement before the New Year deadline, it is still hard to see these sticking points preventing at least a partial deal being struck, but with every day the deadline is extended, market nerves and the possibility of hard Brexit increases.

Expected Ranges

AUD/USD: 0.7370 - 0.7460 ▲

AUD/EUR: 0.6080 - 0.6190 ▲

GBP/AUD: 1.7980 - 1.8180 ▲

AUD/NZD: 1.0420 - 1.0550 ▲

AUD/CAD: 0.9520 - 0.9620 ▲