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Forex Market: AUD/USD trades not far from three-month highs supported by upbeat Australian GDP data, positive vaccine news

AUD/USD extended gains from the prior trading day on Wednesday and traded not far from Monday’s three-month high of 0.7408, as upbeat Australian GDP data as well as hopes of additional US economic stimulus and more positive headlines regarding coronavirus vaccines supported investor risk sentiment.

A report by the Australian Bureau of Statistics showed earlier on Wednesday that the nation’s economy had expanded at a quarterly rate of 3.3% during the three months to September, while outstripping a consensus of analyst estimates pointing to a 2.6% growth. It has been the fastest rate of expansion since the first quarter of 1976, as economic activity resumed amid the pandemic.

Household consumption rose at a record quarterly pace, by 7.9%, in Q3 after a 12.5% drop in the previous quarter. Government spending continued to increase in Q3, by 1.4%.

In annual terms, Australia’s GDP shrank 3.8% during the third quarter, or at a slower rate than anticipated (-4.4%).

Despite “good” macro data, however, the country still has a long way to full recovery, according to Reserve Bank of Australia Governor Philip Lowe.

Lowe also said he kept an “open mind” on whether to increase the central bank’s AUD 100 billion bond-purchasing programme, with much depending on the pace of recovery.

“We expect the RBA will either remove or increase the target yield by the middle of next year, which will further support AUD in 2021,” Kim Mundy, a senior economist at CBA, was quoted as saying by Reuters, while referring to RBA’s 0.1% target for three-year bond yields.

“We expect AUD will lift to $0.7800 by year-end,” Mundy added.

As of 10:26 GMT on Wednesday AUD/USD was edging up 0.13% to trade at 0.7378, after earlier touching an intraday high of 0.7393, or a level not seen since November 30th (0.7408). The major pair appreciated 4.48% in November, which marked its best monthly performance since April.

In terms of US macroeconomic data, today market players will be paying attention to the monthly data on private sector employment change by ADP due out at 13:15 GMT.

Additionally, several Federal Reserve officials are expected to make speeches, including a testimony by Fed Chair Jerome Powell at 15:00 GMT.

Bond Yield Spread

The spread between 2-year Australian and 2-year US bond yields, which reflects the flow of funds in a short term, equaled -5.8 basis points (-0.058%) as of 9:15 GMT on Wednesday, up from -6.6 basis points on December 1st.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7360
R1 – 0.7382
R2 – 0.7395
R3 – 0.7417
R4 – 0.7439

S1 – 0.7347
S2 – 0.7325
S3 – 0.7311
S4 – 0.7298

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