AUD/USD: Traders bracing for a rock-'n'-roll week of price action

There was very little action in the Aussie overnight as investors brace themselves for the week ahead, weighing up the series of risk events in an otherwise risk-off start to the week. Wall Street was a sea of red the DJIA is now back into bearish territory. 

Aussie is closely correlated to risk and AUD/JPY is the one to watch. If the yen picks up the pace, threatening a break of the 109 handle vs the dollar, Aussie will likely be weighed up. If the moves are accompanied by a soft CPI reading, with NAB having announced that it is going to raise its standard variable rate for owner-occupiers repaying principal and interest by 0.12 percentage points to 5.36 percent this Thursday, months after Commonwealth Bank, Westpac, and ANZ imposed out-of-cycle hikes, the bar is lowered for an RBA cut which would weigh on AUD/USD. 

"An as-expected print (1.75%/y) could boost the AUD as the markets are looking for disappointment. The RBA has been silent for weeks, so next week's RBA deluge will be closely watched to see if the tightening bias is dropped," analysts at TD Securities explained, adding, "OIS is nearly 70% priced for 25bp rate cut by November. However, the RBA has always been 'reluctant cutters' and so far price and activity data do not support a material shift in stance just yet. The wages report on Feb 20 is the next data hurdle once it is confirmed that inflation is tracking as per the RBA's projections."

AUD/USD levels

• Support levels: 0.7160 0.7125 0.7085
• Resistance levels: 0.7200 0.7235 0.7270

Valeria Bednarik, Chief Analyst at FXStreet explained that from a technical point of view, the pair has still room to resume gains:

"In the 4 hours chart, it´s holding above all of its moving with the 100 SMA a few pips below the current level, as technical indicators hold into positive ground, the Momentum consolidating around its daily high. The pair is also developing well above a Fibonacci support at 0.7125, with the risk skewing to the downside only on a break below this last. To the upside, the key is now 0.7234, this month high."