- A higher-than-expected Consumer Price Index (CPI) in Australia could offer a chance to break above 0.7100.
- The US calendar will feature S&P Global PMIs on Tuesday and GDP on Wednesday.
- AUD/USD: Failure to gain traction above 0.7050 will expose the pair to sellers; otherwise, a 0.7100 test is on the cards.
The Australian Dollar (AUD) climbs sharply against the US Dollar (USD) even though the greenback is positing minimal gains, spurred by risk appetite improvement. Also, Australia’s inflation report on Wednesday could trigger a reaction by the Reserve Bank of Australia (RBA). At the time of writing, the AUD/USD is trading at 0.7025.
AUD/USD holds steadily above 0.7000 despite a bid US Dollar
The AUD/USD has extended us gains, though slightly capped by the buck. The US Dollar Index (DXY), a gauge of the buck’s value against six peers, is gaining 0.13%, at 102.124, underpinned by US Treasury bond yields rising. The 10-year benchmark note rate advances three and a half bps at 3.521%.
Following the Wall Street opening, the Conference Board (CB) reported its Leading Economic Index (LEI), which dropped for the tenth month in December. The US LEI fell sharply again in December—continuing to signal recession for the US economy in the near term,” said Ataman Ozyildirim, Senior Director, Economics, at The Conference Board. “There was widespread weakness among leading indicators in December, indicating deteriorating conditions for labor markets, manufacturing, housing construction, and financial markets in the months ahead.”
In the meantime, money market futures expect the Federal Reserve (Fed) to hike the 25 bps rate hikes at the February 1 meeting, leaving the Federal Funds rate (FFR) at 4.50-4.75%.
Elsewhere, the Reserve Bank of Australia (RBA) is expected to hike rates by 25 bps, the cash rate on February 7 to 3.35%. Markets had priced in an 80% chance for the RBA lifting rates, and the cash rate is seeing peaking at 3.55%-3.60%.
In the meantime, Wednesday’s release of the Australian Consumer Price Index (CPI) for the fourth quarter is expected to rise 1.5% QoQ and 7.4% YoY. According to Westpac analysts, that should be the cycle peak for inflation. A softer reading would send the AUD/USD diving below 0.7000; otherwise, it could open the door for further upside and test the 0.7100 mark.
On the US front, its calendar will feature the S&P Global PMIs, ahead of Wednesday’s Gross Domestic Product (GDP) for the fourth quarter and the entire year of 2022.
AUD/USD Technical Analysis
Although the AUD/USD extended its gains above the 0.7000 figure, the YTD high of 0.7063 remains intact, with sellers stepping in around the 0.7050 area and lowering prices. Failure to gain traction above 0.7063 has kept the AUD/USD from testing the August 11 swing high of 0.7136 and sent the pair diving beneath the 0.7000 mark. Break below the latter would expose the 20-day Exponential Moving Average (EMA) at 0.6889.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.