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AUD retreats as vaccine optimism fades

AUD - Australian Dollar

Having failed to break above 0.73 the AUD drifted lower through trade on Thursday as market demand for risk soured amid what seems to be profit taking and general investor caution. Having tested a break above resistance at 0.7290 earlier this week the AUD struggled to maintain momentum, dragged down by a broader risk asset sell off. The optimism that followed Pfizer and BioNtech’s vaccine update has faded Thursday. Markets seemed keen to capitalise on recent gains, taking profit having amended near term economic expectations. While a successful COVID-19 immunisation program will ultimately allow the global economy to rebuild, logistical and distribution challenges mean broad cross-sections of the community are unlikely to gain access a COVID-19 vaccine until late 2021, meaning short term challenges remain in play.

The AUD slipped below 0.7250 to touch intraday lows at 0.7228. With little of note on today’s macroeconomic agenda we expect the risk narrative will continue to drive direction. A consolidated break above 0.73 and 0.7350 remains elusive as COVID-19 concerns linger.

Key Movers

The Euro outperformed overnight, extending back beyond 1.18 despite a contraction in industrial production. A broader risk asset sell off appears to have helped the single currency as investors chase the world’s most liquid currency pair. The US dollar index was largely steady on the day with gains against risk assets offset by the dip against the Euro. The Great British Pound was the day's worst performer down almost 1% following a weak Q3 GDP print. While data was largely in line with expectations the UK economy has been devastated by COVID-19 and is still some 10% softer than before the pandemic. With new nationwide restrictions now in play as daily case numbers grow at an exponential rate there is little hope for a Q4 recovery. Sterling holds onto gains above 1.30 and currently buys 1.3118. Attentions today remain with the broader risk narrative as markets continue to set aside fundamentals and macroeconomic data sets.

Expected Ranges

AUD/USD: 0.7150 - 0.7340 ▼

AUD/EUR: 0.6050 - 0.6220 ▼

GBP/AUD: 1.7920 - 1.8280 ▼

AUD/NZD: 1.0520 - 1.0630 ▼

AUD/CAD: 0.9450 - 0.9540 ▲