- AUD/USD is testing a critical supply zone, where failures open significant downside risk.
- RBA Lowe will speak on “Covid, Our Changing Economy and Monetary Policy”.
At the time of writing, AUD/USD is trading at 0.7266 in the open between a 0.7263 and 0.7270 range so far following a bullish close on Friday.
However, AUD/USD traded a very narrow 0.7222-42 range and was unable to penetrate the resistance cluster of old support which opens downside prospects on continued failures.
It was risk-on all the way on Friday, but the Aussie could not quite keep up with the pace of US equities, nor particularly flourish in the divergence between the spread of the virus domestically compared to the US, where it is out of control.
New York’s daily Covid-19 cases exceeded 5,000, the highest since April. Also, California, Oregon and Washington state have urged arriving people to self-quarantine, while Illinois reported a record number of daily infections and hospitalizations, a day after Chicago announced a stay-home advisory.
Meanwhile, if the US dollar doesn’t take off from its current demand zone, the Aussie could find some additional support on the vaccine sentiment which is buying commodity markets.
Looking to the industrial metals, copper, as a leading barometer for economic health for which AUD trades as a proxy, was ending the week up 0.95% on the day at $7,000. Also, iron ore futures rebounded as falling inventories and strong steel production points to strong demand.
”Holdings at major ports in China fell 0.3% to 127.8mt last week, according to Mysteel data. This comes despite shipments from Australia hitting a record amount for October. Steel companies in China are running their mills are high utilisation rates as the government pushes investment infrastructure,” analysts at ANZ Bank explained.
However, the mood in general could sour for the commodity complex due to the new restrictions in the US.
Particularly, these could weigh on sentiment in the crude oil market, despite the emergence of an effective vaccine.
For today, Reserve Bank of Australia’s Governor Phillip Lowe will speak on “Covid, Our Changing Economy and Monetary Policy” at the CEDA Annual Dinner.
AUD/USD technical analysis
According to the 4-hour chart, the price is consolidated in the supply territory and below trendline resistance.
Failures below and a break of a 38.2% Fibonacci could seal the deal for bears seeking a continuation towards key confluence areas in the lower half of the 0.71 area.
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