Home Daily Commentaries AUD rally continues as Omicron fears abate

AUD rally continues as Omicron fears abate

Daily Currency Update

The Australian dollar rally continued through trade on Thursday, marking fresh highs at 0.7251 amid a sustained resurgence in risk demand as omicron fears abate. Despite an exponential surge in COVID 19 case numbers around the world, markets looked through near-term headwinds and instead pinned hopes the omicron variants impact on the global economy will be shallower and shorter than earlier strains. With little of note on the macroeconomic ticket sentiment carried the AUD toward the top end of recent ranges. With liquidity limited through the holiday period, we expect price action will remain contained with Omicron headlines continuing to govern risk appetite and direction. If early data continues to support anecdotal evidence, and the omicron mutation proves less severe than first feared we could see the AUD continue toward resistance at 0.7280/90 and perhaps test a break above 0.73 before the year is out.

This is the last OFX Daily Commentary for 2021. We will return on the 4th of January. We thank you for your readership over the last 12 months and wish you a very happy and safe holiday season.

Key Movers

Haven currencies were again the days big losers as the recent resurgence in risk demand drove gains across risk assets and commodity-led currencies. The JPY and CHF led to losses across major currencies while the CAD notched fresh 6-day highs, the Norwegian Kroner rallied, and the AUD broke toward 0.7250. An uptick in oil prices and commodities helped drive gains across risk-sensitive currencies as the Omicron variant continues to show signs it will prove less severe than earlier strains and public health systems become better equipped to deal with the disease as new anti-viral drugs become available.

With little of note on hand to drive direction into the weekly close and holiday period, a sustained risk on run could add further downward pressure on the USD. We expect the world’s base currency will find support, at least through Q1 next year. The US domestic economic outlook continues to improve at a faster rate than major counterparts, while expectations for a tightening monetary policy grow, weighing on risk assets and driving USD demand. Our focus remains affixed to Omicron headlines today while US inflation data due January 7 will prove a key marker for direction over the coming weeks.

Expected Ranges

  • AUD/USD: 0.7070 - 0.7290 ▲
  • AUD/EUR: 0.6290 - 0.6430 ▲
  • GBP/AUD: 1.8450 - 1.8630 ▼
  • AUD/NZD: 1.0550 - 1.0630 ▲
  • AUD/CAD: 0.9250 - 0.9320 ▲