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The AUDUSD edged lower by -0.12% to the close of the week as the US dollar recovered ground on strong data ahead of Central Bank meetings scheduled for next week. The US GDP data came in better-than-expected on Thursday rising to 2.9% against 2.6% surveyed while Initial Jobless Claims dropped to 186K against 205K forecasted. The data suggests that the economy is resilient in the face of high-interest rates.
Moreso, a miss in Australia’s PPI data early Friday gave USD an advantage over the commodity-backed currency. Australia’s PPI YoY Q4 data fell to 5.8% against 6.3% surveyed while PPI QoQ data came short at 0.7% against 1.7% anticipated weighing the sentiment on AUDUSD.
However, the focus shifted towards the FOMC policy meeting scheduled on the 1st of February where the Fed is expected to slow their tightening path from 50bps to 25bps. This could see US interest rates hitting a fresh high at 4.75% amidst falling inflationary pressure. The RBA is also expected to maintain a tightening path amidst rising inflation data.
Weekly Chart Analysis
The AUDUSD extended gains slightly above last week’s high as bulls challenge the 0.7000 level, a previous support-turned-resistance. Looking at the RSI, the indicator suggests bullish momentum is expected as it trades above 50.00, a neutral level. Upside gains are capped by the 0.7100 level coinciding with a 200-day moving average and a break above that level could reinforce a rally towards the 0.7250 level and 0.75500, September 2021 high.
However, a weekly close below the 0.7100 level could cause bearish pressure on the pair and the next key level is at 0.6650 a yearly low coinciding with a Bollinger Band Baseline. Bulls are struggling to hold gains above the 200-day moving average, a dynamic support and resistance level acting as a near-term pivot.
The ActivTrader Sentiment tool suggests that 95% of Retail Traders are bearish on the AUDUSD pair. The sentiment has reached extreme levels due to a number of factors in play. Technically the pair has hit a 6-months high and traders could be pricing in a price reversal from that level. Australia’s negative PPI YoY and QoQ data underpinned prospects of a weaker Australian dollar giving a lift to the USD dollar.
However, dollar strength has been in the spotlight ahead of Central Bank meetings next week and a softer tone could cause further rally on the AUDUSD. Investors should closely watch today’s US Personal Consumer expenditure data ahead of the FOMC policy meeting.
Daily Chart Analysis
The AUDUSD was slightly lower from the 0.7120 level as bulls lose steam from a 6-month resistance. A failure to breach above that level could cause bearish pressure on the pair. On the downside, the pair could retrace towards the 0.7000 psychological level and 0.68700 level coinciding with the 50-day moving average. A breach of the 0.68700 level could invalidate the possibility of a bullish bounce back and traders should expect bearish momentum to reign.
However, a break above the 0.7120 level could reinforce bullish pressure towards the 0.7270 level. The MACD indicator suggests that the pair is currently bullish as volume bars trade above the 0.000 benchmark and traders could expect higher prices above the 0.7120 level.
