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  • AUD/USD extends in its astonishing V-shaped recovery.
  • Eyes will be looking to the Fed in the absence of Aussie data this week.

In what can only be described as one of the most abnormal market-moves in the history of forex, AUD has been the standout trade in the coronavirus pandemic. It hasn’t given up the ghost yet.

In today’s Asian session, AUD/USD has printed the highest level for the year so far having travelled from a low of 0.7010 to a high of 0.7042 so far.

The Aussie currency has surprised the majority, however not those who can understand how abnormal market conditions have been over the course of its V-shaped recovery.

Iron ore sales amid strong demand from China and massive current account surpluses at a time where there is minimal speculative capital and highly irregular general flow has enabled the Aussie to skyrocket and fully priced out the economic fallout of the pandemic.

Eyes on the Fed and prospects of the relation trade 

In the absence of Aussie data, traders are trading bind at this juncture. What we do have is the Federal Reserve this week. Reflation trades or confidence in the global recovery is a dollar negative story, so while the US jobs story is positive for the US economy, it may not be that positive for the greenback. 

On the other hand, an unchanged statement with regards to asset purchases will most likely continue to weigh on the dollar as well. However, while the risk-supportive/USD-negative environment can continue to extend the upside potential for AUD/USD is still there.

However, at this juncture, traders might want to look elsewhere for value, at other commodity currencies or EM-FX considering the thin ice Australia is reading with its largest trade partner, China. 

A global slowdown should still be the markets best bet, despite jobs numbers bouncing back by record numbers, they still fell by record levels, least we forget. Moreover, the numbers are still in bad recession territory. Also, fractious US/China relations should kick in at some stage and bear down on the AUD in the months ahead.

AUD/USD levels

 

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