The AUD/USD currency pair recently staged the largest one-day comeback in four years. That reversal came after an early retreat, prompted by softer Australian consumer inflation data. On Wednesday, this pair rose to a 15-month high, showing that the FX market is extremely volatile. Nonetheless, notwithstanding this bullish move, the AUD/USD is unable to attract any serious follow-through buying, a sign of woe to come.
Buildings are damaged, and rekindling of traders saw a 50-pip intraday spike. This increase was driven by speculation about a 35% chance of an interest rate increase in February. That optimism was enough to push the AUD/USD pair higher. Its positive performance was eclipsed by geopolitical risks. Lingering uncertainty in global flashpoints like the Russia-Ukraine War, protests in Iran, and upheaval related to Gaza have continued to spur demand for the US dollar. This development makes the outlook for the Australian dollar more challenging.
Today’s technical setup for the AUD/USD looks like a mixed bag. Moving Average Convergence Divergence (MACD) histogram ticked up barely into the positive. In addition, the MACD line is positioned above the signal line, lingering near the zero mark. At the same time, the RSI (Relative Strength Index) is at 60 — a sign that sentiment among traders is relatively bearish-near neutral. The AUD/USD pair is now trading above the ascending 100-period Simple Moving Average (SMA). Yet, this trend is widely regarded as an encouraging development.
On the basis of these signals, traders should view any AUD/USD pair pullbacks as purely corrective. They’ll interpret these movements as harbingers of a macro downtrend. Other analysts are backing the Australian dollar, arguing that the path of least resistance is still up. Traders should be aware of the risks. They should pay special attention to the continuing U.S. economic data releases, as these would massively impact the future trajectory of the currency pair.
Here are the key items on this week’s US economic docket that stand to impact AUD/USD trading. The ADP report, ISM Services PMI, and JOLTS Job Openings data will provide critical insights into the US labor market and economic conditions. Together, these releases are poised to recalibrate visions of the Federal Reserve’s monetary policy path, especially the timing and magnitude of any future rate cuts.
On top of that, of course, all eyes will be glued to the very important Nonfarm Payrolls (NFP) report due out on Friday. This inflation report will go down as one of the most impactful in how it’s expected to shape market sentiment. Therefore, market participants should be prepared to adjust their outlook for AUD/USD. As market participants await clarity on these developments, many may be loath to make new directional bets on the currency pair.