Australian Dollar Leaps Despite Weak Data as the US Dollar Slides. Higher AUD/USD?

Australian Dollar, AUD/USD, US Dollar, Crude Oil, Gold – Talking Points

• The Australian Dollar vaulted higher as the US Dollar wilted
• US data has led to a theory that the Fed might not be aggressive going forward
• China’s re-opening has not been smooth, but it might move AUD/USD

The Australian Dollar catapulted to a 5-month high above 0.6900 today on the back of the US Dollar being crunched. The ‘big dollar’ is down against all the major currencies. Treasuries gave up notable yield from the 2-year note and beyond.

Friday’s data out of the US has led to speculation that the Fed might further ease its hawkishness at their Federal Open Market Committee (FOMC) meeting next month.

While the change in non-farm payrolls was a solid beat at 223k in December rather than the 205k forecast, average hourly earnings eased to 4.6% year-on-year to the end of December. This was lower than estimates of 5.0% and under 5.1% previously.

There appears to be a perception that this may allow the Fed to hike by 25 basis points (bps), rather than 50 (bps).

In any case, Wall Street liked it and all the main indices finished over 2% higher. APAC equities followed suit with the main bourses in the green. Japan is on holiday today, but the Chicago Board of Trade (CBOT) futures contract has the Nikkei 225 index slightly higher.

The Aussie Dollar moved higher despite building approvals for November collapsing -9.0%, way below the flat, 0% change anticipated and on the back of the prior read of -6.0%.

China’s re-opening hopes may have contributed toward the commodity-linked currency getting a boost. The world’s second-largest economy has stopped quarantine requirements for visitors in another step toward re-joining the world in the post-Covid era.

The WTI crude oil futures contract and the Brent contract are both up over 1% so far today at the time of going to print. Gold is slightly higher, near US$ 1,880 an ounce.

Looking ahead, this week will see crucial US CPI data on Thursday. Fed Chair Jerome Powell is due to be speaking on Tuesday.

The full economic calendar can be viewed here.

AUD/USD TECHNICAL ANALYSIS

AUD/USD raced to a new high above 0.6930 today and it remains in an ascending trend channel.

On the run-up, it broke above some previous highs but fell short of overcoming the 260-day simple moving average (SMA).

That SMA is currently at 0.6937 and it may continue to offer resistance ahead of the prior peaks and break points of 0.6956, 0.7009, 0.7047 and 0.7069.

On the downside, support may lie at the previous lows and breakpoints of 0.6888, 0.6669 and 0.6629.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCathyFX on Twitter