AUD/USD Nears Support Level after Safe-Haven Flows Boost US Dollar
AUD/USD, Bitcoin, US Dollar, Dow Jones – Talking Points
- The Dow Jones Industrial Average closes at record despite risk-off tone on Wall Street
- DXY moves above the 90.5 handle as the US Dollar attracts safe-haven flows
- Australian Dollar falters, but lifting Covid restrictions and economic data may lift AUD/USD
US equity indexes finished mixed on Tuesday but the overall sentiment on Wall Street skewed to the risk-off side. The Dow Jones Industrial Average managed to record a 0.20% gain, marking a record close for the index. The Nasdaq Composite and S&P 500 both fell, closing lower by 0.34% and 0.06%, respectively. Small-cap stocks took a harder hit comparatively, with the Russell 2000 putting in a 0.72% decline.
Elsewhere the DXY index managed to move back above the 90.5 handle, taking back a portion of last week’s losses. Overall, the US Dollar has seen lackluster movement since February started, even with the latest move higher. Bitcoin continued to surge higher, continuing to add to its impressive rise this month, now over 40% higher since February began.
US retail sales and FOMC Minutes are set to direct the market’s overall sentiment tomorrow. According to the DailyFX Economic Calendar, analysts are expecting retail sales to cross the wires at 1.1% for January. A stronger-than-expected print will likely inject some optimism into markets by bolstering the economic recovery narrative. Meanwhile, oil and natural gas prices have surged following a major winter storm that caused havoc across the United States. That trend may continue as another round of severe weather is forecasted to extend severe conditions.
Dow Jones, US Dollar, Bitcoin – 5 Minute Chart
Chart created with TradingView
Wednesday’s Asia-Pacific Outlook
US Dollar strength is putting a hit on risk-sensitive Australian Dollar, with AUD/USD extending losses from Tuesday. The upbeat Greenback may act as a drag on APAC equity markets on Tuesday, but the broader move higher may continue as investors bank on a rosy economic outlook that has been reinforced by rising Covid vaccination rates.
Mainland Chinese markets will remain closed due to the Lunar New Year holiday. Hong Kong’s Hang Seng index will look to extend a healthy 1.90% gain from Tuesday. Commodities like oil and copper appear to be set for further gains despite the stronger US Dollar. Copper hit a fresh multi-year high on Tuesday as investors bet on a broad economic recovery and oil strength will likely remain underpinned by the severe weather in the United States.
Economic prints will be light for the session outside of Australia’s Westpac Leading Index which is expected to cross the wires at 00:30 GMT time. A better-than-expected print may help bolster the Australian Dollar and potentially reverse AUD/USD’s losses from the past 24 hours. Victoria’s lockdown will end at midnight after the state recorded no new Covid cases. Moreover, Australia’s vaccine rollout is now underway, with the country expected to begin inoculating citizens this week.
AUD/USD Technical Outlook
AUD/USD’s current move lower began after the cross failed to clear the 0.7800 psychological level. However, the pair may soon find support from a prior trendline that formed a Symmetrical Triangle – which gave way to a small breakout earlier this month – along with the 61.8% Fibonacci level from the January to February move.
If prices manage to break below the trendline, further losses may be on the cards. A retracement after breaking above a triangle pattern is not atypical, however, and prices may see a bounce higher from the prior resistance level. A move higher would see the 0.7800 level come back into play. The RSI and MACD indicators are both positioned in a fairly neutral stance.
AUD/USD Daily Price Chart
Chart created with TradingView
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--- Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.