AUD/USD bulls caught wrong-footed on US dollar’s resurgence

AUD/USD rallied was faded hard as the US dollar bounced back, catching bulls off guard.
Vaccine news was positive for risk sentiment but also for the US dollar.

Ross J Burland FXStreet

Increased risk appetite buoyed trade-related currencies on Monday amid more optimism for the world economy following the Joe Biden victory and the Pfizer Inc PFE news.

There is a game-changer in the news that an experimental vaccine was more than 90% effective in preventing COVID-19.

The offshore Chinese yuan hit its strongest in 28 months and the Aussie rallied to a high of 0.7338 before falling back to 0.7266 on US dollar strength.

The dollar has been weighed on the prospects, before the news of the vaccine, that there will need to be large injections of fiscal stimulus to support the US economy.

However, the vaccine could be a game-changer for the global and US economy and the greenback, preventing the need for so much stimulus from either the Federal Reserve of the US government.

The reflation trade has hurt the likes of precious metals the most but has done wonders for commodities in general, for which the Aussie trades as a proxy.

The CRB index is higher by some 2.4% at the time of writing.

The underbelly of risk-on should be supportive of the Aussie, depending on how much ground the dollar needs to regain first.

DXY technical analysis

In an analysis yesterday, assuming a rally in the dollar, forecasted a continuation to the downside from a technical perspective:

Before COVID vaccine:

After Covid vaccine:

As can be seen, the before and after charts offer a bearish outlook which rhymes with the fact that despite a vaccine, and while the news is welcome, there is a long road to the economic recovery to go and many uncertainties.

On the other hand, the US dollar can fall on good news such as the vaccine and a Biden US presidency, but too much of a good thing, as seen today, can be game-changer for the greenback.

AUD/USD levels

Overview
Today last price	0.7287
Today Daily Change	0.0028
Today Daily Change %	0.39
Today daily open	0.7259

Trends
Daily SMA20	0.7123
Daily SMA50	0.718
Daily SMA100	0.7129
Daily SMA200	0.6811

Levels
Previous Daily High	0.729
Previous Daily Low	0.7238
Previous Weekly High	0.729
Previous Weekly Low	0.699
Previous Monthly High	0.7244
Previous Monthly Low	0.7002
Daily Fibonacci 38.2%	0.7258
Daily Fibonacci 61.8%	0.727
Daily Pivot Point S1	0.7235
Daily Pivot Point S2	0.7211
Daily Pivot Point S3	0.7183
Daily Pivot Point R1	0.7286
Daily Pivot Point R2	0.7314
Daily Pivot Point R3	0.7338

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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