Forex Market: AUD/USD hits a fresh 134-week high as vaccine rollout, US stimulus fuel investor risk appetite

AUD/USD extended gains from the previous trading day on Wednesday, while reaching highs not seen since June 2018, as the US Dollar continued to retreat and riskier assets were bolstered by vaccine-driven global growth prospects and US fiscal stimulus optimism.

“The start of COVID-19 immunization campaigns in several countries as well as additional U.S. fiscal support reduce downside risk to the global economy and bode well for general financial market sentiment,” Elias Haddad, senior currency strategist at CBA, was quoted as saying by Reuters.

Market players seemed to have ignored the latest delay in US fiscal stimulus, after US Senate Majority Leader Mitch McConnell blocked yesterday a vote on raising coronavirus relief payments to $2,000.

However, this setback “doesn’t really matter too much for investors as they have been over the moon on the back of news that there is still plenty of fiscal support for the U.S. economy,” Naeem Aslam, chief market analyst at Avatrade, wrote in an investor note.

Weaker US Dollar also fueled prices of a range of USD-priced commodities, while supporting Australia’s earnings from goods exports. The latest data showed earnings from iron ore exports had risen to a record high of AUD 139 billion during the year to November, with prices surging even more since then.

On the other hand, the new COVID-19 outbreak in Sydney remains a threat, with new infections rising on Wednesday and outside the initial cluster.

As of 10:25 GMT on Wednesday AUD/USD was gaining 0.72% to trade at 0.7657, after earlier touching an intraday high of 0.7664, or its strongest level since June 7th 2018 (0.7673). The major pair has risen 4.32% so far in December, following another 4.48% surge in November, or its best monthly performance since April.

In terms of US macroeconomic data, today market players will be paying attention to the December data on manufacturing activity in the Chicago area due out at 15:45 GMT and to the November report on pending home sales 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 -6.2 basis points (-0.062%) as of 9:15 GMT on Wednesday, or unchanged compared to December 29th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7600
R1 – 0.7626
R2 – 0.7651
R3 – 0.7677
R4 – 0.7703

S1 – 0.7576
S2 – 0.7550
S3 – 0.7525
S4 – 0.7501