Forex Market: AUD/USD hits a fresh two-week high on improved risk sentiment, optimistic Australian business confidence data

AUD/USD, a liquid proxy for risk, extended gains from the previous two trading days on Tuesday, while touching a fresh two-week high, supported by improved market sentiment and upbeat Australian macro data.

National Australia Bank’s gauge of business confidence, reported earlier Tuesday, climbed to a reading of 10 in January from a revised up value of 5 in December, as economic recovery from the pandemic-induced shocks picked up pace. The biggest improvement in sentiment was observed in sectors such as recreation and personal, finance and business services, wholesale and manufacturing. On the other hand, the sub-gauge of business conditions dropped to 7 in January from 16 in December.

“Business started the year on a more optimistic note, even as conditions eased from the strength we saw in December,” Alan Oster, chief economist at NAB Group, said.

“Importantly, employment remains in positive territory,” Oster added.

Meanwhile, the New Zealand Dollar also rose on Tuesday, tracking Asian shares, after a record-setting session in New York on Monday.

A survey by the Reserve Bank of New Zealand showed inflation expectations for the year had risen to 1.77% compared to 1.23% previously.

“Both currencies today are reacting to the very strong session overnight in U.S. equities, oil and precious metals, and then the local data have really boosted both Aussie and the Kiwi,” Steven Dooley, APAC currency strategist at Western Union Business Solutions, was quoted as saying by Reuters.

As of 10:04 GMT on Tuesday AUD/USD was edging up 0.48% to trade at 0.7734, after earlier touching an intraday high of 0.7736, or its strongest level since January 27th (0.7764). The major pair has risen 1.22% so far in February, following a 0.81% drop in January.

In terms of US macroeconomic data, today market players will be paying attention to the December report on job openings due out 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 -1.1 basis points (-0.011%) as of 9:15 GMT on Tuesday, down from -0.9 basis points on February 8th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7688
R1 – 0.7725
R2 – 0.7752
R3 – 0.7788
R4 – 0.7825

S1 – 0.7661
S2 – 0.7624
S3 – 0.7597
S4 – 0.7570