MUFG Research discusses AUD/USD outlook and flags a scope for extending its recent rebound over the coming weeks.
"The Australian dollar has continued to strengthen during the Asian trading session supported by the more supportive external environment following the temporary ceasefire in the trade war between the US and China. It has helped lift the AUD/USD rate closer to key resistance levels from its 200-day moving average which comes in at 0.7416. The pair has not closed above its 200-day moving average March of this year," MUFG notes.
"After trending weaker between the end of January and the end of October, the Aussie has staged a notable turnaround over the past month with the AUD/USD now standing around 5% above the low from 26th October at 0.7021. In order for the Aussie to extend its rebound beyond the 200-day moving average on a sustained basis, it will likely require: i) the US and China to make “significant progress” in trade talks within the next 90 days, ii) tentative evidence that policy stimulus in China is helping to provide more support for growth, and iii) the Fed to stick to the more dovish policy stance which could potentially include a temporary pause in Q1 after a hike in December," MUFG adds.