AUD/USD: Awaits RBA on the way to 0.7800, market sentiment favors bulls
|- AUD/USD wavers inside the latest triangular formation at Monday’s top.
- Risks remain positive, back the bulls after snapping two-day losing streak.
- Upbeat data, stimulus hopes, vaccine developments portray market optimism, US-China tension, fears of Brazilian covid variant probe sentiment.
- RBA is likely to keep interest rate, bond purchases intact but the tone in policy statement will be observed closely.
AUD/USD gyrates around 0.7770, recently easing from 0.7783, during the early Asian session on Tuesday. The aussie pair printed consolidative recovery moves on Monday, after flashing the heaviest drop in a year the previous trading day, as the market’s mood improved. However, bulls turn cautious ahead of the RBA monetary policy decision off-late.
Risks favored with eyes on RBA…
Having begun the trading week on a positive side, mainly due to the weekend headlines concerning the coronavirus (COVID-19) vaccines and fiscal stimulus updates from the US and the UK, AUD/USD benefited from the upbeat PMIs at home during early Monday. The mood got extra help from expectations that the RBA’s recently unscheduled bond purchases will battle the inflation fears. On the same line, ISM Manufacturing PMI from the US followed the suit of recently welcome activity figures, ex-China, whereas US President Joe Biden “looks forward to speedy passage of the Rescue Plan” per Steve Herman, White House Bureau Chief.
On the negative side, fears of the covid’s Brazilian variant gained momentum as the virus derails natural immunity. Further, the COVID-19 figures picked up bids during the last week for the first time in two months. It’s worth mentioning that the gradually picking up Sino-American tussle and Iran’s rejection to return on the nuclear deal negotiation table tame the risk-on mood.
Against this backdrop, market sentiment stayed mostly positive on Monday. Wall Street benchmarks rallied while the US 10-year Treasury yields eased 2.9 basis points (bps) to 1.427% by press time. Commodities eased but couldn’t derail the Antipodeans.
Looking forward, Australia’s Building Permits for January, expected -3.0% MoM versus 10.9% prior, can entertain AUD/USD traders ahead of the RBA monetary policy decision. Given the Aussie central bank’s latest extension to the bond purchase, beyond the April deadline, the RBA isn’t expected to announce any surprises. However, traders will be more interested in hearing positive commentary from the policy statement if they are to keep the recent recovery moves on the table.
Read: Reserve Bank of Australia Preview: Policymakers at a crossroad
Technical analysis
Sustained bounce off 50-day EMA, currently around 0.7700, eyes a downward sloping trend line connect highs marked during January 06 and February 16, near the 0.7800 threshold. Any further upside will eye the 0.7870 whereas the AUD/USD bears can target the previous month’s low near 0.7560 on breaking 50-day EMA.
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