Australian Dollar, US Dollar, AUD/USD Analysis, Coronavirus – TALKING POINTS
- Australian Dollar may rise with risk-oriented assets after bright day on Wall Street
- Silver prices extended rally, yields fell along with S&P 500 breaking key resistance
- AUD/USD outlook bright after the pair break out of a fortified congestive cocoon
Wall Street equity indices closed higher at the end of Wednesday’s trade with the Dow Jones, S&P 500 and Nasdaq indices up 0.62, 0.57 and 0.24 percent, respectively. The benchmark S&P 500 index’s follow-through after breaking above a key inflection point at 3226.00, which it previously retreated from could mark the resumption of the prior uptrend.
The buoyancy in stocks echoed into foreign exchange markets and further punished the haven-linked US Dollar and anti-risk Japanese Yen. The cycle-sensitive Australian, New Zealand and Canadian Dollars prospered while the commodity-linked Norwegian Krone suffered. Crude oil prices were down for the day, and this may have contributed to the petroleum-linked NOK’s poor performance.
Silver continued its winning streak and is up over eight percent for the day, and over 15 percent since Tuesday. Yields on 10 and 30-year Treasuries fell again today and lowered the cost of holding non-interest-bearing assets.
With signs of economic stabilization – despite a rising number of Covid-19 cases – combined with unprecedented fiscal and monetary policy, traders could be hedging under the narrative that all of it will lead to a spike in inflation. In this regard, the precious metal could be serving as a hedge against aggressive price growth.
Thursday’s Asia-Pacific Trading Session
A relatively sparse data docket places the focus on macro-fundamental themes and diligent vigilance on market mood. If the prior session is an indication of what is to come in Asia-Pacific trade, AUD, NZD and CAD may extend their gains at the expense of JPY and USD. Optimism may also cause regional credit spreads on corporate debt to narrow and help push APAC stocks higher if the perceived risk of default is lower.
Australian Dollar Analysis
AUD/USD has crossed a critical threshold. After over two weeks of relatively directionless trading, the pair surged over 1.60 percent on Tuesday with follow-through. The break may embolden buyers to enter the market if they interpret the upside breakout as a sign of a continuation of the prior uptrend that launched it over 24 percent since bottoming out in March.
AUD/USD – Daily Chart
AUD/USD chart created using TradingView
--- Written by Dimitri Zabelin, Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitriTwitter