AUD : Rally for 2021
(Thu, 31 Dec 2020). In an environment defined by globally low interest rates and increased fiscal support (akin to the 2009-2011 period), growth-linked assets have been gaining favor, the Australian Dollar included.
With fresh yearly highs emerging in both AUD/JPY and AUD/USD rates on the second-to-last trading day of the year, it’s difficult to suggest anything other than a bullish outlook for the Aussie headed into 2021.
There’s a bullish bias to the Australian Dollar in the near-term, according to theIG Client Sentiment Index.
Australian Dollar Peaking into New Year
The near-term outlook for the Australian Dollar remains strong. With Southeast Asia managing the coronavirus pandemic better than any other region in the world, currencies linked to this normally high-growth area have fared well during the second half of 2020. In an environment defined by globally low interest rates and increased fiscal support (akin to the 2009-2011 period), growth-linked assets have been gaining favor, the Australian Dollar included.
Our approach to the Australian Dollar has not changed through December, which started with the assertion “the RBA may not be able to stop near-term appreciation by the Australian Dollar, given recent tweaks to policy.” With fresh yearly highs emerging in both AUD/JPY and AUD/USD rates on the second-to-last trading day of the year, it’s difficult to suggest anything other than a bullish outlook for the Aussie headed into 2021.
AUD/USD RATE TECHNICAL ANALYSIS: DAILY CHART
In early-December it was noted that “the AUD/USD appears to be finally perching itself through sideways consolidation resistance in place for the better part of five months…a simple doubling of the five-month range, which at 422-pips, would suggest a final target of 0.7836 for the next AUD/USD rate rally.” AUD/USD rates are well on their way, touching a fresh yearly high of 0.7686 at the time this report was written.
The next near-term target for AUD/USD’s rally comes in the form of the 38.2% Fibonacci extension of the move measured from the March low to September high, back to the October low. Achieving 0.7720 would be a meaningful accomplishment, and perhaps offer a profit taking point for traders already long.
Otherwise, with bullish momentum proving strong, traders may need to wait for a retest of the EMA envelope before entering with fresh positions. The daily 5-, 8-, 13-, and 21-EMA envelope has proved support every session since November 3; the daily 21-EMA has not been closed below since that date. For now, with daily MACD trending higher in bullish territory, and daily Slow Stochastics are holding in overbought territory, the path of least resistance remains higher for AUD/USD rates.
AUD/JPY RATE TECHNICAL ANALYSIS: DAILY CHART
In the prior AUD/JPY rate forecast it was noted that “the bull flag consolidation in context of the move off of the March lows may be giving way to a bullish breakout attempt in AUD/JPY. The flag resistance was converging with the descending trendline from the November 2014 and January 2018 highs, and the breakout suggests that a meaningful hurdle has been cleared for AUD/JPY rates.” Fresh highs were touched today, with AUD/JPY rates reaching 0.7940.
AUD/JPY rates are still in process of the bullish breakout of the more near-term bull flag, carved out in the last three weeks of December. Accordingly, with the pair holding above the daily 5-, 8-, 13-, and 21-EMA envelope, daily MACD trending higher in bullish territory, and daily Slow Stochastics holding in overbought territory, more upside seems likely for AUD/JPY.
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