The Australian dollar continues to have an uneventful week. AUD/USD is currently trading at 0.7523, down 0.13% on the day. On the fundamental front, Australia releases tier-2 events later in the day, including Manufacturing and Services PMIs for November. The indicators are expected to remain well into expansionary territory, as both sectors continue to show growth.
Aussie enjoying view at 75-level
The Australian dollar is in pause mode this week, after racking up gains of 1.4% last week. This marked a sixth successive week in positive territory, as risk-correlated currencies have pounded the US dollar for months. On Thursday, AUD/USD punched above 0.7500, a psychologically-important level. Although the currency has taken a breather early in the week, there is room for the Australian dollar to resume its upswing – the currency rose to 0.7578 on Monday before retreating, its highest level since June 2018.
More QE on the menu?
The RBA minutes from the December meeting provided a strong hint that the central bank could extend the QE program. The current scheme of AUD100 billion began in November and the bank has stated that it will run for “approximately six months”, which takes us to around April of 2021. The minutes stated that “substantial policy support would therefore be required for a considerable period”, noting that there was significant spare capacity in the labour market. Barring a huge shift in economic conditions, there is a strong chance that the RBA will implement a second dose of QE, with an identical size and duration as the current scheme. This means that QE coverage would extend until around November 2021. This message is good news for the Australian dollar, as it reinforces the bank’s stance of utilizing QE as its main monetary policy tool, and shelving the idea of negative interest rates, which would make the Australian currency less attractive to investors.
- AUD/USD faces resistance at 0.7614, followed by resistance at 0.7693
- There is support at 0.7414. Close by, there is support at 0.7293
- The pair remains above the 10-day MA line
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