Ken Chigbo Market Analysis | AUD bulls have the opportunity to further turn up the heat against USD

Ken Chigbo

February 15, 2021

The Australian Dollar has been on an impressive run to the upside of late, one of the clear outperformers across G10 FX. Looking specifically at AUD/USD, over the last going on eleven months, eight of those it has managed to close in the green, gaining an impressive 1600+ pips. There isn’t one particular catalyst behind the storming push north for AUD, but rather a few factors that are proving to be very much supportive.

 

Firstly, AUD is an extremely sensitive currency to market sentiment, so if there is risk appetite across the broader markets, then it flies. On the other hand, in times of risk-off or safe-haven flows, it tends to be one of the biggest casualties. Since the second half of 2020, sentiment has
been heavily tilted towards flows into riskier assets.

 

Australia back in the midst of the pandemic in March was one of the fastest major economies to take action in locking down their nations and closing borders. It proved highly effective in containing the virus, where other countries were failing with their much slower response.

 

The tight restrictions and central bank and government stimulus measures allowed the economies to start to open quicker than others who were still some way behind. Key economic data points, as a result, have been fast showing decent signs of improvement, again in comparison to other leading economies. Growth has solidly picked up as seen with GDP, in addition to the unemployment rate dropping back down to the lowest since May 2020 and inflationary levels normalizing.

 

In more recent news, the country received a further boost in optimism after it was reported that; Australia will begin inoculating against COVID-19 next week after receiving the first 142,000 doses of the Pfizer-BioNTech vaccine.

 

Lastly, Australia’s biggest two-way trading partner, China is very quickly recovering, last month it reported a decent beat on its GDP data. China’s economy has posted its strongest growth in two years after completing a rapid recovery from the slump caused by the Covid-19 pandemic at the start of 2020.

 

Technical observations: AUD/USD (Daily)

 

 

Price action last week managed to break out of a bullish flag structure, with additional momentum provided on the clearance of 0.7700. The bulls will be eyeing a challenge of the current 2021 highs, sitting just above 0.78000. If this is successfully broken down, then a clear path for a 0.8000 return is likely, dips into this will remain attractive.

 


 

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