SYDNEY: The Australian and New Zealand dollars were sitting on solid gains for the week on Friday after a pullback in their US counterpart cracked some major chart levels and triggered short covering.

The Aussie had eased a touch to $0.7273, but was still up 1.2% for the week having hit a two-month top of $0.7314 overnight. The break of resistance around $0.7276 brightened the technical outlook with a first bull target around $0.7342.

The kiwi dollar paused at $0.6860, after also gaining 1.2% on the week so far to reach a seven-week peak of $0.6890. The breach of resistance at $0.6867 was bullish, setting up retracement targets at $0.6899 and $0.6960.

Still, most of the gains were due to a pullback in the U.S. dollar rather than any improvement in domestic fundamentals.

In Australia, a spike in coronavirus cases has disrupted what had been a strong economic recovery, hitting spending, supply chains and mobility.

Westpac noted spending on its cards fell sharply in the first two weeks of the year, having hit record highs in December.

“The category detail shows a broad-based move, with a slightly bigger slowdown for discretionary categories, hospitality and ‘other durables’ in particular,” said Westpac senior economist Matthew Hassan.

That will test the Reserve Bank of Australia’s (RBA) optimism that the economy could easily weather the spread of the Omicron variant and complicate its decision on whether to end its bond buying campaign in February.

David Plank, head of Australian economics at ANZ, thinks the RBA will still choose to end quantitative easing (QE) next month.

“Critical to this is the RBA’s view that it is the stock of bonds that matters, not the weekly purchases per se,” he said. “Thus continuing to buy bonds means additional easing.”