AUD/USD Upbeat After Friday’s Risk-Off Drop
AUD/USD
News around a new Covid-19 variant, called Omicron, through a curveball on Friday, as markets were trying to put the pandemic in the rearview mirror. Omicron triggered a flight to safety, to the detriment of risk-sensitive commodity currencies, such as the Australian Dollar.
The pair plunged and concluded its fourth straight losing week, heading tow potentially its worst month of the year. Today, it manages to recover some of those losses, as risk conditions normalize during the European hours, but caution is needed to see in what mood will US traders return, following their Thanksgiving holiday.
Sentiment remains the key factor that can determine the next leg of the move and we will also be closely watching any central bank commentary, to see how the latest Covid related news have affected their thinking. This week we expect many central bank speakers mostly form the Fed, with Mr Powell on tap later in the day.
Monetary policy differential has been a key driver for the pair's recent demise, with the Reserve Bank of Australia staying on the dovish side, whereas it US counterpart announced QE tapering earlier in the month.
More to it, the Fed has been turning increasingly hawkish and we will need to see if the new covid variant will lead to a rethink and/or a repricing of market expectations of a faster tightening path.
Past Performance: Past Performance is not an indicator of future results.
On the technical front, AUD/USD is now exposed to August's 2021 low (0.7105) and in risk of further decline towards 0.7052, that marks the 38.2% Fibonacci of the "March 2020 multi-year low/October 2021 High " advance.
On the other hand, the Aussie defended 0.7105 and stages a recovery today, while the Daily chart points to oversold conditions, as per the Relative Strength Index. The last visit of the RSI in the sub-30 area, was after August's lows and had triggered a significant correction higher.
This gives AUD/USD the ability to push towards 0.7200-16, although a sustained improvement in sentiment will likely be needed for such moves. A break above, can pause the downward momentum and bring October's descending trend-line into the spotlight, but the area above mid-0.7200s seems well protected.
Past Performance: Past Performance is not an indicator of future results.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
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