We see the AUD/USD play well into the macro recovery story. The historically known commodity currency blasted past 0.75c in the latter part of 2020.
We previously talked about how there were clean wicks straight 0.76 and how a breach of a key 161.8% entrancement level at around 0.77c would see clean traffic to 80c. As of this moment, we see the AUD/USD strongly past the 0.77 mark – will we see 80c?
With the Vaccine rollout plan set to first make its way to Australians with the highest risk of exposure at the end of February, alongside lofty commodity prices, the Australian dollar has had really good tailwinds as of late.
However, in a recovering economy, alongside large commodity-based industries domiciling in Australia, an extremely strong home currency is not ideal. BHP Billiton, an Australian multinational mining, metals, and petroleum company, stated that the Australian dollar's strengthening was one reason they impaired the value of their Australian thermal coal assets by $250-$350 Million.
Another tailwind that the Australian dollar has been receiving is general dollar weakness across the board. This is on the back of many large institutions such as Citibank, who called for the dollar to weaken up to 20% on further vaccinations this year, stating that The distribution of Vaccines "will catalyze the next leg lower in the structural USD downtrend". Furthermore, as inflation expectations rise in the United States, "this would incentivize investors" to hedge currency exposure, Citibank strategists stated. "Given this setup, there is the potential for the dollar's losses to be front-loaded".
Many analysts are bullish on the Australian dollar due to its historically strong rebound on recovery periods. Are you looking at the Australian dollar?