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Forex Market: AUD/USD hits a fresh 29-month high on US stimulus hopes, upbeat Australian consumer sentiment data

AUD/USD surged sharply in early European session on Wednesday, while hitting a fresh 29-month high, as hopes over US stimulus as well as COVID-19 vaccine approval fueled investor risk sentiment.

The Trump administration proposed on Tuesday a $916 billion coronavirus aid package, after a slimmer proposal had already been rejected by congressional Democrats.

Meanwhile, the Aussie was also supported by upbeat domestic macro data. A gauge by the Melbourne Institute and Westpac Banking Corp showed earlier on Wednesday that consumer sentiment in Australia had been the highest since October 2010 in December, suggesting strong economic activity in the fourth quarter amid successful containment of the COVID-19 outbreak across the country.

Also on market players’ radar are a Wednesday dinner between British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen in Brussels, seen as a last-ditch attempt to secure a post-Brexit trade deal, and a policy meeting by the European Central Bank on Thursday.

“The RBA is now on the sidelines until its next meeting on 2 February. Focus instead should shift to likely central bank easing elsewhere, which could further boost risk sentiment,” Ticehurst wrote in an investor note.

“The Australian economic clouds are lifting too, and a very low Covid-19 count, and rising mobility and confidence are positives for AUD.”

As of 10:23 GMT on Wednesday AUD/USD was gaining 0.87% to trade at 0.7474, after earlier touching an intraday high of 0.7477, or a level not seen since July 10th 2018 (0.7484). The major pair has risen 1.77% so far in December, following another 4.48% surge in November, its best monthly performance since April.

In terms of US macroeconomic data, today market players will be paying attention to the October report on job openings due out at 17:00 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, down from -5.1 basis points on December 8th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7415
R1 – 0.7430
R2 – 0.7451
R3 – 0.7466
R4 – 0.7482

S1 – 0.7394
S2 – 0.7379
S3 – 0.7358
S4 – 0.7338

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