AUD/USD consolidating gains at five-week highs above 0.7400

• The aussie extends rally to five-week highs at 0.7440.
• A higher risk appetite has boosted the Australian dollar.
• AUD/USD is heading towards 0.7450.

The Australian dollar has rallied for the fifth consecutive day on Friday, extending its rebound from 0.7170 lows in late September, to five-week highs at 0.7440, before pulling back to consolidate in the 0.7415/20 area.

Risk appetite has boosted the AUD

An improved market sentiment, with the stock markets advancing for the second consecutive day on the back of upbeat quarterly earnings by major banks and better than expected US retail sales have favored the risk-sensitive Aussie, weighing on safe assets like the US dollar.

Beyond that, the relaxation of COVID-19 restrictions in Sydney, the country’s most populated city after a four-month lockdown has improved optimism. Australian authorities have pledged that the quarantine required for vaccinated travelers that arrive in New South Wales would not be necessary since November 1, since the New South Wales state is set to reach an 80% first-vaccination dose rate on Saturday.

Furthermore, the Chinese central bank has finally assured that Evergrande’s risks to the financial system are “controllable” and unlikely to spread which has eased concerns about a chain reaction affecting the financial sector of the world’s second-largest economy.

AUD/USD heading towards 0.7450 – UOB

According to the FX analysis team at UOB, the pair is heading towards 0.7450: “There is no change in our view even though AUD could consolidate for a couple of days first before heading towards 0.7450. On the downside, a break of the ‘strong support’ at 0.7350 (level was at 0.7325 yesterday) would indicate that the current positive phase has come to an end.”

Technical levels to watch