Market news

21 December 2021

AUD/USD stays defensive around 0.7100 on RBA Minutes, Omicron fears

  • AUD/USD refreshes intraday low on RBA Minutes, US reports first Omicron-linked death.
  • RBA Minutes keeps hopes of economic rebound while also citing fears of the virus.
  • US reports the first Omicron-linked death, WHO, CDC warned of the virus variant.
  • Lack of major data/events favor risk catalysts as the key for fresh direction.

AUD/USD pokes 0.7100 threshold while refreshing the intraday low on the release of the Reserve Bank of Australia’s (RBA) latest Monetary Policy Meeting Minutes amid early Tuesday. The Aussie pair struggles to justify the risk-off mood as equities consolidate recent losses and the Omicron fears escalate.

As per the latest RBA Minutes, “Australia's central bank is optimistic the spread of the Omicron variant will not derail an ongoing economic recovery, giving it the option to end quantitative easing early should the run of activity data stay upbeat, per Reuters. The news adds, “Minutes of the Reserve Bank of Australia's (RBA) Dec. 7 policy meeting showed its board remained committed to keeping interest rates at a super-low 0.1% but was considering how and when to wind up its A$4 billion ($2.84 billion) in weekly bond buying.”

Elsewhere, the US reports the first death linked to the South African covid variant, dubbed as the Omicron, in Texas. Ahead of the news, the US Disease Control and Prevention (CDC) said, per Reuters, “Omicron is now the most common coronavirus variant in the US, accounting for nearly three-quarters of COVID-19 cases.”

On the same line were the World Health Organization (WHO) and the Imperial College of London. The WHO said, “The Omicron variant of the coronavirus is spreading faster than the Delta variant and is causing infections in people already vaccinated or who have recovered from the COVID-19 disease.” On the same line, the British Scientists mentioned, “Infections caused by the Omicron variant of the coronavirus do not appear to be less severe than infections from Delta.”

Adding to the line of the risk-off catalyst is the US-China tussles and fears of the Fed’s rate hike. On Monday, Chinese foreign minister Wang Yi said, per Reuters, "If there is confrontation, then (China) will not fear it, and will fight to the finish." China’s Wang Yi adds, "There is no harm in competition but it should be ‘positive’”. On the same line were fears of the Fed rate-hike, backed by Fed Board of Governors member Christopher Waller

It’s worth noting that the cautious optimism by US President Joe Biden and House Speaker Nancy Pelosi despite Senator Joe Manchin’s rejection to vote in favor of the Build Back Better (BBB) seems to have favored the US stock futures and Asia-Pacific shares to lick their wounds.

That said, the US Treasury yields posted 2.3 basis points (bps) of an upside to 1.42% after declining to the monthly lows the previous day, currently unchanged.

Moving on, AUD/USD traders should pay attention to the qualitative catalysts amid a lack of major data/events on the calendar and the year-end holiday mood.

Technical analysis

A clear downside break of the two-week-old support line, now resistance around 0.7155, joins a steady RSI line to keep AUD/USD sellers hopeful. That said, short-term bears eye monthly horizontal support near 0.7060-55 before challenging the yearly bottom surrounding 0.6995.

On the contrary, corrective pullback needs validation from the 10-DMA level surrounding 0.7150 to challenge the monthly peak of 0.7225.

 

Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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