The Australian Dollar in 2020 was one of the best-performing currencies, following a strong run to the upside from March to December. The pair rallied as much as 1885 pips, after hitting the lowest levels that were seen since 2002.
AUD/USD managed to rise up to heights not seen since 2018, touching the big psychological 0.8000 mark, before being knocked back by likely profit-taking. The big push to the north at the time was being driven by much risk appetite across the markets, influenced by; economic reopening, vaccine optimism, improving data, and the optimism around Joe Biden.
Before we break down the technical observations, let’s firstly note the influential fundamental factors to force some greater AUD selling:
Why the easing now?
Stronger USD (Indirect)
The comeback of the greenback is also likely to be a potential added weight to AUD/USD. It comes thanks to the promising economic outlook spurred by U.S. President Joe Biden’s plans for $2.3 trillion in infrastructure spending and the accelerating rollout of COVID-19 vaccines.
In addition to the U.S. nonfarm payrolls surging 916,000 jobs last month, the largest gain since last August. Data for February was revised higher to show 468,000 jobs created instead of the previously reported 379,000. The unemployment rate also dropped down to 6.0% from 6.2%, the lowest since April 2020. Elsewhere, last week ISM Services PMI came out at the highest number in its history.
Dovish RBA (Direct)
Last week the RBA announced their latest monetary policy decision, leaving interest rates and the current bond-buying program unchanged as expected. In terms of the statement, it was somewhat dovish with regards to tone, given comments such as:
- Recovery remains uneven, there are still uncertainties to the outlook
- Underlying inflation is expected to remain below 2% over the next few years
- RBA prepared to undertake further bond purchases if necessary
- RBA will not increase cash rate until inflation hits the target range of 2% to 3%
- Does not expect such conditions to be met until 2024 at the earliest
Slow Vaccine Rollout
Australia has abandoned a goal to vaccinate nearly all of its 26 million population by the end of 2021 following advice that people under the age of 50 take Pfizer's (NYSE:PFE) COVID-19 vaccine rather than AstraZeneca's (LON:AZN) shot.
Prime Minister Morrison said, “While we would like to see these doses completed before the end of the year, it is not possible to set such targets given the many uncertainties involved”.
AUD/USD Technical Observations
Price action via the daily chart is playing out to a head and shoulders pattern, with a retest of the neckline being observed. A period of consolidation is also being observed, which has seemingly formed a bearish flag structure, subject to a breakout south.