AUD/USD Trims Gains as Wall Street Stocks Run out of Steam

Hj Azhar RamliDecember 29, 2021

0 9 6 minutes read

Australian Dollar, AUD/USD, Omicron, Wall Street, Holiday Trading – Talking Points

Asia-Pacific markets may see a mixed open after volatility on Wall Street
Omicron fears linger as trading volumes remain light amid holiday season
AUD/USD set a fresh December high before trimming gains this morning

Wednesday’s Asia-Pacific Forecast

The risk-sensitive Australian Dollar is nearly unchanged versus the US Dollar going into early Asia-Pacific trading. The currency pair hit a fresh multi-month high overnight before pulling back during a downbeat Wall Street session. The Dow Jones Industrial Average (DJIA) was the only major US index to close in the green, with a gain of 0.26%. Trading volumes remain light amid the holiday season.

Asian equity indexes finished mostly higher Tuesday, although the risk-off shift in New York looks likely to spill over and drag prices across the region. Traders continue to spar with Omicron headlines, but analysts remain largely optimistic on equity prices going into the New Year. While the new variant has injected volatility into financial markets, it appears traders are seeing it as nothing more than a speed bump on the way to a full global recovery.

Australia is boasting a vaccination rate north of 90%, and Prime Minister Scott Morrison signaled earlier this month that the country is past heavy-handed government responses. However, the Australian leader is set to attend an emergency cabinet meeting today over the large increase in cases. Another lockdown, while unlikely, isn’t completely off the table. But such a move would likely put a big hit on overall sentiment in the APAC region.

Meanwhile, cases are also on the rise in China, with some provinces currently in lockdowns as the country’s Zero-Covid strategy remains in place. A study earlier this month found that a third AstraZeneca dose – the most common Covid vaccine in China – does offer protection against the new variant, an encouraging development, but the study has yet to complete a peer-review process.

Crude and Brent oil prices moved higher overnight, following big gains earlier in the week. WTI Crude prices are trading just above $76 per barrel, the highest level since November 26, when oil prices sank more than 10%. Elsewhere, gold hit its highest level of the month before trimming gains as the US Dollar attracted some safe-haven flows. Today’s economic calendar is light, with only low-impact data out of the Philippines, Singapore and Thailand set to cross the wires.

AUD/USD Technical Forecast

AUD/USD hit a fresh monthly high overnight at 0.7264 before pulling back into its range from earlier in the week. Prices are closing in on the falling 50-day SMA, which may pose a significant level of resistance, with the 100-day closely above. The MACD oscillator made a cross above its centerline, which could indicate some bullish energy building back up. However, if prices accelerate lower, the September low at 0.7170 may shift back into view as possible support.