Treasury yields and commodity prices drive AUD toward 0.80 US cents

Daily Currency Update

The Australian dollar led gains through trade on Monday, finally breaching resistance at 0.78 US cents as reflation driven trade forced commodities and commodity currencies higher. Rates across treasuries surged with both Australian and NZ yields leading markets higher through the domestic session as investors chased higher returns, largely ignoring the RBA’s QE bond purchase announcement. The AUD eye a break above 0.79 before a moderation in price action saw the currency slip back toward 0.7860 leading into the overnight session. The AUD then tracked sideways through the middle of the night before finding another leg and bursting through 0.79 cents to mark fresh highs at 0.7930. Surging commodity prices and a weaker USD underpinned the move as expectations for reflation drive commodities higher. Copper moved through $9,000 a tonne, for the first time in almost a decade while oil advanced over 3%. Adding to the risk on push reports Pfizer’s vaccine reduces the risk of COVID 19 infection by up to 85% buoyed hopes a H2 recovery is achievable.
Having extended beyond recent ranges our attentions now turn to resistance on moves approaching 0.80. This remains an important psychological barrier and a breakthrough this handle could signal and extended rally.