AUD/USD meets a critical level of hourly support, central banks in focus

AUD/USD AUD/USD is edging back to flat during the New York day, travelling between a low of 0.7486 and a high of 0.7536 so far and within an almost two-week range. 

The Australian dollar gained 4% in October, the most in 10 months, helped by high commodity prices amid energy shortages in Europe and Asia and amid speculation the bank will drop a commitment to keep yields on short term bonds at record lows. 

RBA in focus

Meanwhile, traders braced for Australia's central bank meeting this week that could mark a retreat from its dovish rate policy. As for positioning, net AUD short positions have moved lower for a third straight week, but they still have not captured the recent sharp moves in money market rates. ''The RBA still has not intervened to maintain the 0.10% yield on the targeted April 2024 bond,'' analysts at Brown Brothers Harriman explained.

''Due to the lack of any action by the RBA, markets expect the bank to abandon Yield Curve Control tomorrow and tacitly acknowledge that liftoff is likely to come before the current guidance for 2024. If this were to happen, AUD would likely strengthen and so the economy would face a double whammy of higher interest rates and a stronger currency,'' the analysts added. Moreover, the swaps market is pricing in around 75 bp of tightening over the next twelve months. 

DXY on the backfoot

Meanwhile, the US dollar is on the back foot versus its main rivals on Monday flowing its biggest daily rise in more than four months in the previous session. The Federal Reserve is eyed as a major risk event this week also, ahead of the all-important Nonfarm Payrolls on Friday.

The Fed is widely expected to announce a tapering of stimulus, a factor that has fueled the greenback's rise in recent weeks. The dollar index DXY, which measures the US currency against six rivals, was down 0.24% at 93.907 at the time of writing. 

AUD/USD technical analysis

The price has corrected a significant portion of the recent bullish impulse to meet the hourly 21-EMA and there are now prospects of an upside continuation for the sessions ahead from this support zone.