The Australian dollar has started to recover from the initial losses after the opening bell on Thursday. In the mid of the strength of the US currency, the Aussie managed to hit the same speed and eventually advanced after a few hours. As the RBA maintains its cash rate at 1.50 percent until 2017, the Australian currency will likely find it difficult to maintain its stability. Also, the Fed might be gearing for the highly anticipated December rate hike. Despite the lack of support, the soaring oil prices drive provides temporary lift to the Aussie.
At the time of writing, AUD/USD trades at 0.73967 after plunging at 0.73827 at the start of the morning session. The pair opened lower following the tight trading range before the session ended on Wednesday night. AUD/USD had a session high of 0.73997 and a session low of 0.73913 while the support was found at 0.73811 and resistance at 0.74107.
Figure 1. Hourly AUD/USD Chart
Figure 2. H4 AUD/USD Chart (Zoom In)
As seen in the graph provided above, the pair moved up at 0.74000 level in the mid-session. However, the gains were not sustained as it dropped to the 0.73000 level once again. A breakthrough will likely lead into a new resistance at 0.74185 and a fall through will result in a new support at 0.73577. As the steady range continues, the pair traded below its 50-day SMA of 0.73693 and goes closer to its 20-day SMA of 0.73812.
In the wider view, AUD/USD was evidently at the lower ground. The pair is still far from its November peak of 0.77756 and only stayed between 0.74500 and 0.73000 levels. Lower cash rates from the Reserve Bank of Australia and the uncertainties in the market couldn’t provide an optimistic outlook for the Australian currency.
Meanwhile, the US currency hovered to 14-year highs against the majors as the Fed rate hike expectation was strengthened by the current Fed minutes. According to the minutes, “Based on the relatively limited information received since the September FOMC meeting, participants generally agreed that the case for increasing the target range for the federal funds rate had continued to strengthen.”
“Most participants expressed a view that it could well become appropriate to raise the target range for the federal funds rate relatively soon, so long as incoming data provided some further evidence of continued progress toward the Committee’s objectives.”
The US Dollar Index jumped 0.04 percent to 101.76 as of 12:33 UTC.
In a separate report, oil prices were moderately strong amid the mixed expectations on the OPEC meeting next week. Although the finality of the production could be settled, the amount to be reduced might not be enough to address the existing global glut supply. If in case the agreement is a success in all aspects, oil futures could back beyond the $50 level – a growth stimulus for commodity currencies such as the Australian dollar.
As of 12:07 UTC, Brent crude for the January contract on the International Commodity Exchange added 0.27 percent to $49.08 per barrel. On the New York Mercantile Exchange, WTI crude advanced 0.27 percent to $48.09 bbl while RBOB gasoline climbed 0.16 percent to $142.40 per gallon. However, the gains of the oil might be limited as the IEA warned about the decline of investments for the third year in 2017.
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