AUD/USD Targets Monthly High as Omicron Risk Fades and Nasdaq 100 Rallies

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AUSTRALIAN DOLLAR, AUD/USD, OMICRON, RISK TRENDS, OIL - TALKING POINTS

• Asia-Pacific markets set for rosy open after Wall Street gains for a second day
• Australian private sector data in focus as risk-taking in broader markets improve
• AUD/USD aims at the December high after breaking above key resistance level

THURSDAY’S ASIA-PACIFIC FORECAST

Asia-Pacific trading looks set for a rosy start to the day after stocks gained on Wall Street overnight. Technology stocks led the gains in New York, with the Nasdaq-100 Index (NDX) closing 1.21% higher. The US Dollar fell versus most of its peers, while risk-sensitive currencies like the Australian Dollar gained. Treasuries were little changed. Investors’ fears over the Omicron variant continue to fall as positive data on hospitalization rates cross the wires. Risk assets received a boost from positive US economic data as well, with Q3 GDP growth receiving an upward revision and consumer confidence seeing a strong uptick for December.

South Africa and Scotland reported data showing that those with Omicron infections were at a much lower risk of hospitalization versus the Delta strain. While it’s not conclusive, most signs now point to a more contagious virus, but also one that is less deadly. Some health policy experts believe that may help accelerate the end of the pandemic. The new strain has already caused a flurry of border closures, however, and those may drag on growth into the New Year. New Zealand earlier this week announced that border closures will stay in effect until February.

 

In line with the risk-on tone in markets, Crude and Brent oil prices rose overnight. A US government report showed crude oil stockpiles fell 4.72 million barrels for the week ending December 17. Analysts were expecting a drop of only 2.75 million barrels. However, stockpiles at Cushing, Oklahoma rose by 1.46 million barrels, which may cap upside in the commodity. Gasoline stocks also rose sharply, with a 5.53 million barrel build. That could add a headwind to demand for oil during the busy holiday travel season.

Today’s economic docket doesn’t offer much in the way of potential high-risk events. The trading week is quickly drawing to a close as the Christmas holiday approaches. Many markets across the APAC region will be closed on Friday. Australia will report private sector credit growth for November. Later in the day, Indonesia will report its M2 money supply (Nov), and the Philippines will see trade data for November cross the wires. Japan is also set to release final readings on its October coincident index and leading economic index.

AUD/USD TECHNICAL FORECAST

AUD/USD broke above its September low at 0.7170 overnight, a level that has served as resistance through December. The December high at 0.7223 now serves as the next major barrier. A break higher would put the falling 50-day Simple Moving Average (SMA) in focus. A bullish Engulfing candlestick from Tuesday appear to inject some strength into the currency pair. MACD is also improving along with the RSI oscillator.

AUD/USD DAILY CHART

Chart created with TradingView

Written by Thomas Westwater, Analyst for DailyFX.com. 23rd December 2021