AUD/USD Analysis – 09 February 2022

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AUD/USD –H4

Last week, the Reserve Bank of Australia (RBA) had announced the end of its asset purchases program and maintained interest rates at 0.1%, pushing back against a hike this year. [1]

Markets however are more aggressive in their lift-off expectations, in the face of rising inflation and solid jobs reports, while the government announced on Monday the re-opening of the country's international borders from February 21, to all fully vaccinated visa holders.

These are factors that support the Aussie, but the US Federal Reserve is far more hawkish than the RBA, since it has pointed to rate lift-off next month and multiple hikes ahead, with the Quantitative easing program due to end in early March, after a super-fast tapering.

Friday's solid NFP's form the US, strengthen the case for monetary tightening by the Fed, with the conversation shifting towards the size of future rate hikes.

A the time of writing, CME's FedWatch Tool [3] projects 75% probability of a 25 basis point rise in March, and 25% of a 50 basis point hike. For December, the highest probability is assigned to rates at 1.50%-1.75%, meaning six 25 bps increases.

AUD/USD rebounds from Friday's NFP-fueled slump and runs its second straight profitable week, following January's 1+ year low (0.6966). Today it tests its EMA200 and eyes key resistance at around 0.7180 provided by the lower border of the Daily Ichimoku Cloud, which would give it a chance to extend the advance towards and beyond the descending trend-line form October's high.

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On the other hand, recent geopolitical tensions persist and a potential flare-up could spark fresh risk aversion and weigh on the pair. Furthermore, the Relative Strength Index (RSI) points towards oversold levels, which could render a breach of the Ichimoku Cloud elusive.

As such, pressure back towards the broader 0.7100 region would not be surprising, but a catalyst would be likely needed for a bigger drop towards and below 0.7061-50.

Nikos Tzabouras

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.

References

1

Retrieved 09 Feb 2022 https://www.rba.gov.au/media-releases/2022/mr-22-02.html

3

Retrieved 03 Jul 2022 https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html#

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