The Manhattan skyline for the AUD/USD currency pair is really a lot less dramatic than the chart illustrates. The variations you’re looking at take place within a narrow band between 0.680 and 0.720, markedly different from looking at the skyline of the USD/ZAR currency pair. The AUD/USD pair is currently trading at 0.71100 which is a slight improvement from 1 month ago for the Australian dollar. For the year-to-date, the AUD/USD currency pair has endured tremendous levels of volatility, despite the tight trading range. Recall that on Wednesday, 10 February 2016, Janet Yellen of the Federal Reserve Bank wrapped up a 2-day meeting with lawmakers and while she glossed over concerns regarding the global economy; she intimated that the US economy appears to be robust at this juncture.
She did not rule out the possibility of raising interest rates in 2016, but she sounded a more cautious tone nonetheless. At the conclusion of the meeting, a flurry of market activity resulted. Currency traders around the world started dumping the USD as expectations of a March rate hike receded into the background. The absence of an interest-rate hike spells doom and gloom for the USD, since it is precisely a rate hike that will allow for an appreciation of the greenback against its trading partners. The mass sell-off of the US dollar resulted in a spike for the AUD/USD currency pair.
As can be seen from the above chart, the AUD spiked to 0.7327, and the currency pair remains in a range between that figure and 0.6826. This has been the trading range for the week between Monday the 8 to 12 February. The downside bias for the currency pair would take place at an exchange rate of 0.7076 and the upside move would likely take place above 0.7136. If the currency pair stays below 0.7122, sellers will likely dominate. For now and through President’s Day weekend, we are likely to see sideways movement in the AUD/USD currency pair.
What factors impact upon the AUD?
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