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AUDUSD Upside Could Continue On RBA Minutes, Vaccine-Driven Risk Flows

Vaccine-driven risk flows allowed risky currency assets to gain traction on Monday, with the AUDUSD on course towards 2-month highs at the time of writing ahead of Tuesday’s RBA minutes.

Reserve Bank of Australia (RBA) Governor Phillip Lowe, who seems to have formed a habit of dropping market-moving lines just before major news items lately, was in the news today after he opened the door towards the possibility of negative rates. Lowe said that negative rates were possible but would only be considered if “if all the world’s major banks had negative rates,” he opined.

The Aussie Dollar also got a push from upbeat retail sales and industrial production data from China. The Aussie Dollar is regarded as a trading proxy for Chinese GDP and manufacturing data, as Australia is the primary import destination for China’s thirsty industries. 

The RBA is due to release details of the minutes of its November 3 meeting, where the bank lowered its policy rate (priced in before the news release) and expanded its asset purchase program. This decision was overshadowed mainly by risky sentiment, which allowed the Aussie Dollar to strengthen against the pressurized greenback. With many analysts at institutional desks calling for further weakness in the US Dollar, we could see sentiment outweighing whatever the RBA minutes have to say.

Technical levels to Watch

Today’s intraday violation of the resistance level at 0.72977 has put the AUDUSD in good stead to close above this level. However, the intraday high has stalled at the same cluster seen between 10-18 September and November 10 at 0.73382; this level is the price to beat for buyers. A bullish extension and close above this level confirms the break of 0.72977 and allows the pair to aim for the previous high of September 2 located at 0.73831. A clearance of this area sets the AUDUSD on course for its highest close of 2020.

On the flip side, a rejection at current highs may allow for a pullback and retest of 0.72977, with the supply zone that is found between 0.72301 (ceiling) and 0.72013 (floor) serving as additional support. 0.71363 and 0.71010 round off potential short-term targets to the south.

AUDUSD Daily Chart