Aussie Range Trading Continues

The Australian dollar has been in calm waters all week, as the pair has not veered much from the 0.76 level. Currently, AUD/USD is trading at 0.7618, down 0.24% on the day.

Retail sales slip in December

Australian data was overall positive this week, with solid numbers across economic sectors. The AIG Manufacturing and Construction indices moved higher into expansionary territory, and Commodity Prices registered a double-digit gain. Most impressive was NAB Quarterly Business Confidence, which soared to 14 in the fourth quarter of 2020, after reeling off five consecutive declines. The survey found that business conditions and confidence were higher, signs that the business sector is strengthening. On Friday, the news was not as cheery from Retail Sales for December, which came in at -4.1%. However, the Australian dollar shrugged off the weak release, as the preliminary estimate stood at -4.2%.

The RBA sent a crystal clear message to the markets that its dovish stance would remain in place well into 2o21. The bank announced that it was extending QE for an additional six months, to the tune of AUD 100 billion. The bank also stated that it did not expect to raise interest rates prior to 2024. On Wednesday, RBA Governor Lowe sounded cautiously optimistic about economic conditions. Lowe said that the economy had proven more resilient than the RBA had originally anticipated, but cautioned that the economy still required support due to sluggish inflation and high unemployment. Lowe reiterated that the central bank remained committed to QE, saying that it was “premature to be considering withdrawal of the monetary stimulus”. By extending its QE program, the RBA is taking some upward pressure off the Australian dollar, which has appreciated strongly against the US dollar.

AUD/USD Technical

AUD/USD Daily Chart

  • 0.7740 is the first line of resistance, following by resistance at 0.7838
  • There is support at 0.7568, which will come under pressure if AUD/USD continues to lose ground. Below, we have support at 0.7498
  • The 50-day moving average (MA) remains relevant

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