AUD/USD: Bulls eye 0

AUD/USD: Bulls eye 0.7800 amid US dollar weakness, cautious optimism

macro of aussie 100 note 8615104 Large
  • AUD/USD keeps Friday’s upside momentum, stays above 0.7750 at the week’s start.
  • US dollar weakness could be traced to the rally in equities, Treasury yields.
  • Fresh lockdowns in Pacific nations, off in China probed bulls cheering stimulus, vaccine developments.
  • A light calendar ahead, off in Beijing and Washing will keep risk catalysts on the driver’s seat.

AUD/USD picks up bids to 0.7560 during the initial trades of Monday’s Asian session. In doing so, the aussie pair rises for the third consecutive day despite the fresh coronavirus (COVID-19)-led activity restrictions in Victoria and Auckland. US dollar weakness seems more responsible for the upside move, which in turn takes clues from the optimistic share prices and bond yields.

Everybody cheers King Dollar’s weakness…

Be it commodities or Antipodeans, not to forget some of the major currency pairs, everybody cheers the US dollar weakness as markets hope President Joe Biden’s $1.9 trillion stimulus is nearby. Also favoring the mood could be the escalation in the covid vaccination drive.

It’s worth mentioning that the equities rally, the jump in the bond yields and the rising bitcoin may also be connected to the US dollar’s weakness. While equities have stimulus and vaccine hopes to cheer, bond yields are expectedly taking clues from the recent downbeat US employment figures and hints of further weakness in the American employment, flashed by the Fed policymakers, not to forget expectations of rising inflation. Further, cryptocurrencies seem to cheer the hopes of more buyers from the lines of Tesla, Apple and Morgan Stanley to keep the upside momentum intact.

On the contrary, the latest virus cases from Australia and New Zealand renews the covid fears even as governments have actively responded to the initial outbreak. The reason could be traced from the World Health Organization’s (WHO) statements suggesting re-infection of the COVID-19 and slower vaccinations.

It should, however, be noted that the off in China, due to the Lunar New Year celebrations, join a light calendar at home and abroad to keep the AUD/USD bulls chained. Even so, Wall Street benchmarks refreshed record top while the US 10-year Treasury yields rose to the fresh high of the year on Friday.

Moving on, vaccine developments and the news relating to the coronavirus as well as the US covid relief stimulus should entertain AUD/USD traders amid an absence of major data/events.

Technical analysis

A sustained break of the six-week-old falling trend line resistance, at 0.7755 now, directs AUD/USD bulls towards highs marked on January 21 and 14, respectively around 0.7785 and 0.7805, ahead of challenging the yearly peak surrounding 0.7820. Meanwhile, a 21-day SMA of 0.7695 adds to the support below the stated previous resistance line.

Credit: FX Street

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