Rally Pauses

AUD/USD slightly higher in Asia, last up 4 pips at 0.7774. The pair dropped as low as 0.7723 in European hours before recovering, but is still some way off cycle highs after an almost relentless advance. The decline was driven by strength in the US dollar which firmed against all G10 peers amid higher yields.

• There could be some headwinds for AUD from iron ore export data. Iron ore exports revenues fell in November, retreating from the record high hit in the previous month. Iron ore revenues fell 7.9% to AUD 10.3bn, while coal revenue fell 7.6% to AUD 3.1bn.
• Latest figures indicate that measures to contain coronavirus are having the desired effect, NSW reported 4 new cases in the past 24 hours. Elsewhere, the Australian government has reached a deal with Novavax to purchase 51m doses of its vaccine, delivery is expected by mid-2021 which is slightly later than many other developed nations.
• The pair last week breached resistance at 0.7640, Dec 17 high and a bull trigger. This confirmed a resumption of the uptrend. The break higher this week reinforces bullish conditions by maintaining the bullish price sequence of higher highs and higher lows. The focus is on 0.7885 next, Mar 15, 2018 high. Moving average studies are in a bull mode too. Firm support is at 0.7643, Jan 1 low.
• Markets look ahead to domestic foreign reserves data later in the session, due at 0530GMT.