The commodity currency pairs, like the AUD/USD and NZD/USD, are trading sideways in narrow ranges, due to a lack of volatility in the market. The pairs halted their overnight declining streak and remain depressed just above the 0.8900 level, mainly due to the worsening coronavirus (COVID-19) woes in the US, Europe and some of the notable Asian nations like Japan, which is fueling doubts over the global economic recovery and weighing on the market trading sentiment.

Apart from this, the geopolitical tensions between China and some notable countries, like the US, are putting a burden on the equity market. As a result, the risk-off market sentiment cannot drive sharp movements in the market. The strength of the broad-based US dollar, backed by the market risk-off tone, has become a key factor that has kept a lid on any additional losses in the currency pair. In the meantime, the positive developments concerning the coronavirus (COVID-19) vaccine have helped to limit deeper losses in the market trading sentiment, which might provide some support to the currency pair.

Despite the renewed optimism over the possible vaccines for the highly infectious coronavirus, the market trading sentiment failed to extend its positive overnight moves. It started to flash red during the early European session on the day, possibly due to the worrying headlines concerning the US-China tussle and the resurgence of new COVID-19 cases in the US, Europe, and Japan. This, in turn, provided a boost to the safe-haven Swiss Franc and exerted some additional pressure on the currency pair.

As per the latest report, the resurgence of the coronavirus (COVID-19) in Europe and the US is still not showing any signs of slowing down, which keeps fueling doubts over economic recovery, as the authorities in the US and Europe keep announcing back to back restrictions on activities, in the hopes that this will curb the spread of the virus. Los Angeles has recorded another record high in new coronavirus infections. Considering the current rate at which the virus is spreading, California has imposed restrictions on bars, tattoo shops and hair salons.

Across the pond, the southern German Federal State of Bavaria has declared that it will impose stronger lockdowns from Wednesday until Jan. 5, while the South Korean authorities have intensified social distancing rules for Seoul and surrounding areas. This, in turn, exerted downside pressure on the market risk tone and contributed to losses in the currency pair. The tussle between China and the US keeps gaining market attention and challenging the market risk tone. As per the latest reports, the Trump administration is preparing to impose sanctions on at least a dozen Chinese officials, in the wake of their alleged role in China’s disqualification of elected opposition legislators in Hong Kong.

As a result, the broad-based US dollar managed to stop its early day losses, picking up some bids during the early European session, as the traders started to cheer the risk-off market mood. However, the bullish bias of the US dollar was rather unaffected by the worsening coronavirus (COVID-19) conditions in the US and the disappointing American jobs data, which raised expectations of fresh economic stimulus measures. However, the gains in the greenback turned out to be one of the leading factors that has helped to limit deeper losses in the currency pair. Meanwhile, the US Dollar Index, which tracks the greenback against a bucket of other currencies, has risen to 90.850.

On the other hand, the optimism over a possible treatment for the highly infectious coronavirus has become a key factor that is helping to put a stop to the bearish rally in the market trading sentiment, which might lend support to the currency pair. The hopes of effective vaccines were fueled further after the reports suggesting that the UK is set to become the first country to roll out BNT162b2, the COVID-19 vaccine developed by Pfizer Inc (NYSE: PFE) and BioNTech SE (F:22UAy), this week.

In the absence of any key data/events on the day, the market traders will keep their eyes on RBA Govovernor Lowe’s speech. In addition to this, the updates about the US stimulus package will also be key to watch. In the meantime, the risk catalysts, like geopolitics and the virus woes, not to forget the Brexit, will not lose their significance.

On the technical front, the NZD/USD has formed a triple bottom level at 0.7030, and violation of this level could extend the selling trend until 0.7010. However, the breakout at the 0.7050 level could lead the NZD/USD price further upwards until the 0.7060 level. Our buying signal on the NZD/USD is still doing well – keep an eye on the FX Leaders signal page for more updates. 

On the other hand, the AUD/USD pair is gaining support at the 0.7411 level, and the pair could even bounce off the 0.7449 level, until the 0.7410 level has been violated. So far, the signal seems deemed to lose, but the violation of the 0.7410 level could lead the price of the AUD/USD pair towards the 0.7375 level. Let’s keep an eye on it. Good luck!