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AUD/USD Bulls take back control to the 0.70 handle

  • AUD/USD has returned back to the 0.70 handle and former option barrier as risk bounces, supporting the high betas as price tracks the performance in risk assets. 
  • AUD/USD is currently trading at 0.7015, up from a low of 0.6940.

AUD/USD 0.6715 was the overnight low on the Apple news, (a metaphor for current market anxieties), which sparked widespread panic and deep concerns over the state of the macroeconomic backdrop for the New Year ahead that sank risk assets and sent the greenback to the top its peddle stool, (favoured for its liquidity and yield).

The moves overnight were fierce, catching an early illiquid Asian session off guard and exposing the market short gamma which meant there was a lack of option strike coverage resulting in no bids that enabled the pair to crash as low and as far as it did, dragged by AUD/JPY - the FX market's risk barometer. 

The dollar has its own problems

However, there has been a bargain hunt and a follow through ahead of the nonfarm payrolls at the end of this week which has seen a bid back into the Aussie. The dollar has its own problems, and yesterday, the Fed funds futures were actually suggesting a 91% probability that rates will finish the year at or below current levels. On the flipside though, demand for safe haven this year is likely to be the key driver, fed by fears over trade wars and slowing global growth

AUD/USD levels

Analysts at Commerzbank explained that AUD/USD has spiked down into 9 year lows and argued that this price action looks exhaustive:

"We have a TD perfected set up on the daily chart and a 13 count on the weekly chart. This suggests the end of the down move for now. Rallies will find initial resistance at the 0.6949-.6982 gap ahead of 55 day ma at 0.7174 and will need to regain this to re target the September and early November highs at 0.7302/14 to reassert upside interest to the 200 day ma at 0.7349." 

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