Forex Market: AUD/USD hits a fresh one-month high, tracking a surge in oil prices, recovery optimism also supports

AUD/USD extended gains from the previous three trading days on Tuesday, while touching a fresh one-month high, as it benefited from a surge in oil prices and optimism over a global economic recovery.

The Aussie dollar, along with other commodity currencies, tracked higher oil prices after a cold front triggered a shutdown of wells and refineries in Texas, the largest crude oil producing state.

Support was also drawn from higher prices of iron ore and copper as well as from vaccine roll-out optimism and growing expectations of a global recovery, analysts said.

“That’s been the key driver over the last 24 hours,” Steven Dooley, APAC currency strategist at Western Union Business Solutions, was quoted as saying by Reuters.

“It’s also the culmination of a re-rating of commodities in general, driving the view that the global recovery and reflation brings the potential for further gains in commodity currencies.”

Meanwhile, the Minutes from the Reserve Bank of Australia’s (RBA) policy meeting in February showed that the bank remained committed to maintaining the existing policy settings in support of economic recovery from the pandemic. Policy makers also noted that Australia would require very significant monetary support for some time, as it would take several years before the bank’s inflation and unemployment objectives were achieved.

On February 2nd the RBA extended its bond-purchasing program and also stressed on its commitment to keep interest rates on hold until at least 2024.

As of 10:11 GMT on Tuesday AUD/USD was edging up 0.13% to trade at 0.7789, after earlier touching an intraday high of 0.7805, or its strongest level since January 14th (0.7805). The major pair has risen 1.96% so far in February, following a 0.81% drop in January.

Bond Yield Spread

The spread between 2-year Australian and 2-year US bond yields, which reflects the flow of funds in a short term, equaled -1.3 basis points (-0.013%) as of 9:15 GMT on Tuesday, down from -1.0 basis point on February 15th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7775
R1 – 0.7792
R2 – 0.7806
R3 – 0.7823
R4 – 0.7839

S1 – 0.7762
S2 – 0.7745
S3 – 0.7732
S4 – 0.7719