AUD/USD – H4
Last week the pair staged a relief rally and recorded its best week since August, ending its six-week losing streak. This was largely fueled by optimism around Omicron's severity, but during the current week, sentiment sours as investor monitor the spread of the new variant.
The day started bad, but the Aussie reacts as we head towards the European open and earlier risk aversion seems to ease. Improved sentiment could lead to a push for the descending trend-line from October highs and the broader 0.7165-87 area. At this stage however, it does not inspire confidence for further advance towards and beyond the EMA200 (0.72220).
Although impressive, last week's correction was shallow, contained below the 38.2% Fibonacci of the "October High/December Low" drop and the pair still trades below the aforementioned trend-line and EMA200. This maintains risk to the downside and renders AUD/USD vulnerable to 0.7061-52 and a break can open the door for new 2021 lows.
Past Performance: Past Performance is not an indicator of future results.
The pair's trajectory will likely be determined by Wednesday's monetary policy decision by the US Federal Reserve. The policy differential is unfavorable for the pair, since the Reserve Bank of Australia (RBA) maintained its QE and interest rates last week, whereas its US counterpart has started tapering its asset purchase program and has pointed towards a faster pace, but hawkish expectation seem to be high. In any case, caution is needed around the event, it has the potential to spur volatility.
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.