- Bulls take back control in a synchronised switch-up in financial and commodity markets.
- AUD/USD moving into fresh session highs and away from 0.64 the figure as critical support.
As the USD drops, stocks rally, AUD is riding a bid in the commodity complex with the CRB index printing fresh highs on Thursday +2.7%. At the time of writing, AUD/USD is trading at 0.6457, grinding from 0.6425 to a session high of 0.6468.
There have been no clear catalysts for the move, but everything has moved in synch. The US dollar index, DXY, is holding onto positive territory around 110.36 but has fallen from the highs of 100.56 in recent trade. Both copper and oil prices printed fresh highs in the final hour of trade on Wall Street and the S&P 500 index is on track to end the day near to the highs for the session.
Geopolitical fundamentals remain bearish for AUD
Meanwhile, the market fundamentals remain bearish for AUD. The domestic economy is vulnerable to not only a second wave of COVID-19 in the world as businesses get back to work, slowly but trade wars between the US and China, as well as Australia and China, are moving to the fore.
Increasingly harsh rhetoric from Washington and Beijing have seen the White House trade adviser Peter Navarro said that China should pay for its role in spreading the coronavirus which threatens to flare up tensions in a 22-month battle between the world’s two largest economies and roiled markets. As for Australia and China, tensions following Beijing’s move earlier this week to block imports of Australian barley and beef are high.
The bears are seeking a break below 0.64 the figure and bulls are back in control seeking out the 0.6476 May 5th highs.
“Above 0.6570 we look for a test of the 0.6670/84 March high and 200-day moving average where we would expect it to struggle,” analysts at Commerzbank explained. “Above here would target 0.6910, the 2013-2020 resistance line.”