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AUD buoyed as risk sentiment surges following Trump commitment to transition of power

AUD - Australian Dollar

The Australian dollar broke resistance overnight, extending through 0.7330 to mark fresh highs at 0.7367. Risk sentiment surged after President Trump acknowledged that the transition to a Biden Presidency should begin. While Trump stopped short of conceding and assured supporters the campaign would continue to challenge the election result the commitment to a peaceful transition of power at least removed another risk barrier. Further support came following reports Former Fed Chair Janet Yellen will be named Biden’s Treasury Secretary. Yellen, has publicly called for increased government stimulus to support the economy through the pandemic and her appointment brings with it, an expectation for a larger spending plan.

Having struggled to break above 0.7340 the overnight rally and shift in risk narrative opens the door for the AUD to extend toward September highs at 0.74. With focus turning away from short term headwinds as optimism for a vaccine led recovery in 2021 increases there is ample scope for the AUD to capitalise on further USD weakness into the end of the year.

Key Movers

The US dollar, Japanese Yen and Swiss franc all shifted lower overnight as risk sentiment surged and the narrative shifted away from short term headwinds after President Trump acknowledged the head of the General Services Administration should begin the transition to a Biden led government. While the President assured supporters they will continue to challenge the election result the removal of the threat of a hostile transition of power eliminates another risk barrier weighing on currency markets. The dollar index fell three tenths of a percent and closed in on Monday’s three-month low at 92.013. With key technical supports at 92 still intact another surge in risk sentiment and a break below this threshold could open the door to further declines and an extension in the downward shift.

With the Euro and GBP enjoying gains on the back of broader USD weakness attentions remain affixed to the ongoing risk narrative. With Brexit negotiations expected to yield at least a partial trade agreement as early as Friday another risk barrier could well be removed in the coming days opening the door for another assault on 1.20 for the Euro and a break above 1.34/35 for Sterling.

Expected Ranges

AUD/USD: 0.7270 - 0.7410 ▲

AUD/EUR: 0.6120 - 0.6220 ▲

GBP/AUD: 1.8020 - 1.8380 ▼

AUD/NZD: 1.0480 - 1.0620 ▲

AUD/CAD: 0.9480 - 0.9630 ▲