The Australian dollar rose early Wednesday on news of surprisingly strong economic growth in the last quarter of 2020nL2N2L100N.
The 10-year Australian government bond yield also climbed in response to the data and that may provide the fuel for the AUD/USD to attempt a sustained break above 0.8000.
While the Q4 GDP data is old news, the above-forecast result came at a time of periodic lockdowns, border closures and ongoing uncertainty in Australia.
The strong breakdown of the growth data bodes well for 2021 when vaccine rollouts in Australia and globally are expected to drive a significant economic rebound.
The Reserve Bank of Australia met on Tuesday and reiterated their commitment to extraordinarily accommodative monetary policy and to maintaining a cap on the three-year government bond yield nL3N2L00DC. Yet if the 10-year bond yield continues to rise in anticipation of the Australian economy rebounding faster than the RBA expects, it will underpin the AUD/USD.
The 0.8000 level may prove stubborn resistance, as the AUD/USD completed a bearish outside week on Friday after hitting a two-year high of 0.8007 on Thursday.
A break above the 61.8 Fibonacci retracement of the 0.8007-0.7692 drop at 0.7886 would pave the way for at least an attempt to break back above 0.8000.
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