- 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.
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:
-637404776134703525.png)
After Covid vaccine:
-637405478459047569.png)
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
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD hovers around 1.0700 amid mixed sentiment
EUR/USD is trading close to 1.0700, struggling to build on the previous bounce early Monday. European political uncertainty continues to undermine the Euro and cap the pair's upside. The cautious mood acts as a tailwind for the USD and favors EUR/USD bearish traders.
GBP/USD hangs near its lowest level since early May, seems vulnerable below 1.2700
GBP/USD is seen consolidating its recent losses to over a one-month low touched on Friday. The Fed’s hawkish outlook continues to underpin the USD and exerts pressure on the major. The divergent Fed-BoE policy expectations could lend some support and limit deeper losses.
Gold sellers regain control, eye a sustained move below $2,300
Gold price is reversing a part of Friday’s upswing, having faced rejection once again above the $2,330 level early Monday. Gold price fails to benefit from a pause in the US Dollar upsurge, as the US Treasury bond yields recover after last week’s downward spiral.
Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Bitcoin retesting its major resistance level
Bitcoin price is retesting its weekly resistance level of $67,147. Ethereum price finds support around $3,321, the price imbalance between $3,146 and $3,498. Ripple price faces rejection due to the key resistance level of $0.499.
Busy week ahead: What are markets watching this week?
This week is gearing up to be another eventful calendar for policy watchers, welcoming three updates from the Reserve Bank of Australia (RBA), the Swiss National Bank (SNB) and the Bank of England (BoE).