AUD/USD correction could be in order ahead of Fed minutes

AUD/USD bears stay in control into daily support but correction in sight.
Central banks are the focus and FOMC minutes will be key.

Ross J Burland FXStreet

AUSD/USD ended the day on Friday 0.67% lower falling from a high of 0.7291 to a low of 0.7227. The US dollar climbed Friday as investors sought safe havens in fear of covid contagion. Austria said it would be the first country in Western Europe to reimpose a full lockdown amid surging COVID-19 infections and Germany said it could follow suit.

After two straight down days, DXY is trading higher near 96 and on track to test this week’s cycle high near 96.241. Additionally, Federal Reserve Governor Christopher Waller said the US central bank should speed up the pace of tapering to give more leeway to raise interest rates from their near-zero level sooner than it currently expects if high inflation and the strength of job gains persist. Adding to the hawkishness, Fed Vice Chair Richard Clarida said it "may very well be appropriate" to discuss speeding up the Fed's asset purchase wind-down when it next meets, on Dec. 14-15.

Meanwhile, the Reserve Bank of Australia's governor, Phillip Lowe, has also been keen to point out the characteristics of the Australian labour market, specifically with respect to wage inflation. ''The RBA’s take on the Australian labour market is crucial to explaining the relative dovishness of the RBA,'' analysts at Rabobank explained. ''This message has been reinforced by the RBA fixing its guidance for rate hike directly to developments in wage inflation.''

Eyes on the Fed minutes

Looking ahead to the week, the Federal Reserve minutes will undoubtedly reflect a range of views on risks, analysts at Brown Brothers Harriman said, ''but with most officials seeing no rush for rate hikes given the large net drop in jobs and expected slowing in inflation. They will likely also make clear that realization of upside risks could lead to rate hikes soon after tapering ends, with the added point that tapering is highly unlikely to end before June.''

AUD/USD technical analysis

AUD/USD has been trending lower since the start of the month, with the greenback supported by the ongoing debate about the prospects of a 2022 Fed rate hike. Assuming the RBA reiterates a cautiously dovish message in its next policy meeting AUD/USD could struggle to win back ground, analysts at Rabobank argued. ''We target a move to 0.72 on a 3-month view.''

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

EUR/USD accelerates losses, focus is on 1.1800

EUR/USD’s selling pressure is gathering pace now, opening the door to a potential test of the key 1.1800 region sooner rather than later. The pair’s pullback comes on the back of marked gains in the US Dollar following US data releases and the publication of the FOMC Minutes later in the day.

GBP/USD turns negative near 1.3540

GBP/USD reverses its initial upside momentum and is now adding to previous declines, revisiting at the same time the 1.3540 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.

Gold picks pace, flirts with $5,000

Gold is back on the front foot on Wednesday, shaking off part of the early week softness and pushing higher towards the key $5,000 mark per troy ounce. The move comes ahead of the FOMC Minutes and is unfolding despite an intense rebound in the US Dollar.

Fed Minutes to shed light on January hold decision amid hawkish rate outlook

The Minutes of the Fed’s January 27-28 monetary policy meeting will be published today. Details of discussions on the decision to leave the policy rate unchanged will be scrutinized by investors.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Sui extends sideways action ahead of Grayscale’s GSUI ETF launch

Sui is extending its downtrend for the second consecutive day, trading at 0.95 at the time of writing on Wednesday. The Layer-1 token is down over 16% in February and approximately 34% from the start of the year, aligning with the overall bearish sentiment across the crypto market.