AUD/USD ANALYSIS & TALKING POINTS
- Encouraging Chinese expectations keep AUD bid.
- All eyes on RBA and FOMC minutes tomorrow.
- AUD/USD bulls eye 200-day MA.
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AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP
The Australian dollar capitalized on last week’s close above the 0.6500 psychological handle this Monday morning as markets mull over global monetary policy. Recent weak US economic data particularly from the labor market saw US Treasury yields slip alongside USD weakness. Australian jobs data was quite the opposite with unemployment holding steady while employment change beat estimates. Inflation expectations have pushed higher and that could place more pressure on the Reserve Bank of Australia (RBA) to sustain tight monetary policy with the possibility of additional interest rate hikes. Looking at money market pricing below, it is evident that markets have left the door open for more tightening. That being said, incoming data will be crucial for guidance around central bank strategy.
RBA INTEREST RATE PROBABILITIES
Source: Refinitiv
Supplementing the AUD this morning was the fact that China kept both its LPR rates steady after recent economic data showed some improvement. Prior stimulus measures may now be bearing fruit with markets viewing this in a positive light. Commodity prices are mostly bid across the board on the back of a weaker dollar and optimism around China - the pro-growth AUD thus benefitted. The economic calendar for the rest of the trading day looks to be relatively muted but tomorrow’s slew of RBA speakers, RBA minutes and FOMC minutes will likely bring some volatility to the pair.
AUD/USD ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX economic calendar
TECHNICAL ANALYSIS
AUD/USD DAILY CHART
Chart prepared by Warren Venketas, TradingView
AUD/USD daily price action above has now confidently broken above the 0.6500 level and head towards the 200-day moving average (blue). Bearish/negative divergence remains in play via the Relative Strength Index (RSI) and could unfold with a peak around the 200-day MA resistance zone.
- 0.6596
- 200-day MA
Key support levels:
- 0.6500
- 0.6459
- 50-day MA
- 0.6358
IG CLIENT SENTIMENT DATA: BULLISH (AUD/USD)
IGCS shows retail traders are currently net LONG on AUD/USD, with 60% of traders currently holding long positions.
Download the latest sentiment guide (below) to see how daily and weekly positional changes affect AUD/USD sentiment and outlook.
Introduction to Technical Analysis
Market Sentiment
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