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24 Dec 2021

AUD/USD: Bulls battle monthly resistance around 0.7250 amid upbeat sentiment

  • AUD/USD seesaws near the highest level in December, bulls seem to have run out of steam.
  • Market’s mood remains brighter as Omicron linked updates are positive.
  • Strong US data favored yields but stocks stayed firmer.
  • No major data, holiday season to restrict momentum.

AUD/USD prices have likely switched to the Christmas mood in advance, after refreshing the monthly high with 0.7253. That said, the Aussie pair seesaws around an upward sloping trend line from November 30 while taking rounds to 0.7250 during early Friday morning in Asia.

Positive updates concerning the milder fears from the South African covid variant, dubbed as Omicron, join upbeat signs of medical cure to the stated virus variant to favor the risk appetite. Adding to the firmer sentiment are the hopes of US stimulus, despite short-term bleak at the White House.

After approving Pfizer’s pill to battle the Omicron on Wednesday, the US Food and Drug Administration (FDA) also approved Merck's Covid-19 pill on Thursday. Earlier in the week, US Military also conveyed news of developing a single cure for covid and all variants. Also on the positive side were the studies showing Omicron has lesser scope hospitalization.

It should be noted, however, that French cancellation of orders for Merck’s pill, citing notably lesser effect than promoted, joins a steady rise in Omicron cases to challenge the market optimism.

On a different page, US President Joe Biden and House Speaker Nancy Pelosi remain hopeful of getting the Build Back Better (BBB) plan through the House even as Senator Joe Manchin opposes the bill. As per the latest news from CNN, “Sen. Joe Manchin effectively put an end to negotiations over the current version of the Build Back Better Act, in part over concerns that some provisions might exacerbate inflation. But many economists believe its effect on inflation would be marginal.”

Macroeconomics had little success in directing short-term AUD/USD moves. That said, firmer prints of US Durable Goods Orders and PCE Price Index for November couldn’t reverse the previous run-up of equities and riskier assets despite fuelling the US Treasury yields to a two-week high of 1.50% after the release. At home, Private Sector Credit grew more-than-prior in November.

Looking forward, an early close in Aussie markets and an off in the US, coupled with the light calendar and holiday mood, may restrict the AUD/USD pair’s moves. However, any surprises over Omicron covid variant or US stimulus, not to forget those from China, still can move the pair.

Technical analysis

Although a clear upside break of 20-DMA and bullish MACD signals favor AUD/USD bulls, an upward sloping trend line from November 30, around 0.7250, challenges the immediate advances.

Alternatively, pullback moves may initially aim for the 0.7200 round figure before challenging September’s low near 0.7170.

 

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