The Australian Dollar surged to the upside on Thursday, hitting a 2-1/2 year peak, on strong iron ore prices. The Aussie was also helped by a weaker U.S. Dollar, which fell in reaction to the release of weaker-than-expected jobless claims data, which increased the urgency for U.S. lawmakers to push through new fiscal stimulus before year-end.

Initial weekly jobless claims jumped to 853,000 last week, topping a Dow Jones estimate of 730,000. That marks the highest number of initial claims being filed since September and the first time since October that they topped 800,000.

The most actively traded contract for China’s benchmark iron ore futures, traded on Dalian Commodity Exchange, surge over 7.0% on early Friday to refresh the record high near $150.00. While the May contract rose to 981 Chinese yuan, other contracts ranging from December 2020 to March 2021 also jumped between 4.0% and 8.0% during the latest run-up. Thus

Although hopes of the coronavirus (COVID-19) vaccine and China’s successful recovery from the pandemic could be identified as helping the commodity prices, successive cuts in the 2021 output forecasts by major iron ore producer Vale also favored the prices. In this regard, Australia mining said, “This is propped up by a reduced supply estimate from Vale, which is likely to produce 300-305 million tones for this year, falling short of its previously downgraded 2020 target of over 310 million tones.” This favors the AUD.

On the other hand, The US inflation will likely trough in the next several months and rise above 2% in 2021, according to the bond king and Doubleline Capital’s CEO Jeffrey Gundlach. “The inflation may range from 2.25% to 2.4% in 2021, Gundlach said Tuesday on a webcast for his flagship Double Line Total Return Bond Fund, according to Bloomberg.

AUD/USD 4 Hour Chart:

Support: 0.7462 (S1), 0.7387 (S2), 0.7348 (S3).

Resistance: 0.7575 (R1), 0.7613 (R2), 0.7688 (R3).

All the catalysts favors Australian dollar against Dollar. We expect a bullish trend for AUD/USD.