AUD/USD steady despite a more cautious appetite for risk

AUD - Australian Dollar

Currency movements were modest through trade on Wednesday, allowing the AUD to sustain Tuesday’s uptick and hold onto gains above 0.7330. While demand for risk stalled, softer than anticipated US data sets, led by a surge in jobless claims, forced the world's base currency lower, propping up the AUD as investors prepared positions leading into the Thanksgiving long weekend. The AUD bounced between 0.7325 and 0.7375 seemingly unable to break the final resistance handle ahead of 0.74 and 0.75. Having broken above 0.7330 earlier this week resistance appears to have formed support, at least in the short term, with intraday troughs approaching this handle prompting buying. The risk narrative continues to drive direction as long-term optimism begins to outweigh near-term headwinds. While there is still a risk a shift in sentiment could prompt a swift correction, we see ample scope for the AUD to continue to mark higher highs through the coming weeks.

Key Movers

The US dollar edged nearer 3-month lows on Wednesday, despite Tuesday’s risk on the rally running out of steam. Jobless claims increased last week as the near-term impacts of the COVID-19 pandemic weigh on the US economy. The virus continues to spread across the US with little signs of slowing down, forcing States and local governments to re-introduce social distancing restrictions. While consumer spending and business investment enjoyed strong gains through October, the worsening pandemic offers little hope a Q4 retracement will be avoided. AS investors prepare positions for the Thanksgiving Holiday weekend our attentions turn to the FOMC meeting minutes. Earlier this month the Fed discussed using bond and asset purchases to drive activity and support the economy through the pandemic, and we will be looking to the minutes for further guidance and any signal looser monetary policy may be introduced. More accommodating conditions will weigh further on the USD as investors look to equities and risk assets for a higher yield return.

Sterling made another bid to break above 1.34 falling short at 1.3390 while the Euro pushed back through 1.19 to touch new highs at 1.1930. With optimism a trade deal between the UK and EU could be announced before the end of the month, there is scope for both currency to enjoy further upside, with a breakdown in negotiations prompting a swift and steep correction. Our attentions today remain with COVID-19 and Brexit headlines for short term direction.

Expected Ranges

AUD/USD: 0.7280 - 0.7410 ▲

AUD/EUR: 0.6110 - 0.6230 ▼

GBP/AUD: 1.8080 - 1.8320 ▲

AUD/NZD: 1.0450 - 1.0560 ▼

AUD/CAD: 0.9520 - 0.9620 ▲