By ForexTime
The Australian Dollar has been the best-performing G10 currency against the US dollar so far in 2023.
AUDUSD currently also boasts a year-to-date advance of more than 3.7% at the time of writing.
And the Aussie’s performance could be impacted by the Reserve Bank of Australia’s first policy meeting of the year, to be held amidst these other potential market-moving events over the coming week:
Monday, February 6
Free Reports:
Tuesday, February 7
Wednesday, February 8
Thursday, February 9
Friday, February 10
The RBA is set to trigger a hike of 25 basis points (bps) next week.
If so:
The RBA even contemplated pausing its rate hikes even at its December policy meeting, for fear of doing too much damage to the Australian economy.
Recall that central banks hike interest rates in order to “destroy demand” and subdue inflation.
And there have been enough signs that the RBA hikes are taking their toll:
… any of the above “dovish” outcomes may prompt the unwinding of some of AUD’s stellar year-to-date gains.
Look out for initial support at AUDUSD’s 21-day simple moving average (SMA) which currently sits just around the psychologically-important 0.7000 level.
Aussie bulls could then take such “hawkish” cues by the RBA to launch AUDUSD closer towards the early-June peak at 0.72830.
At the time of writing, Bloomberg’s FX model points to a 71% chance that AUDUSD trades within the 0.6925 to 0.7199 range over the next one-week period.
One word = China.
Australia is very much exposed to China, with the latter accounting for about 40% of Australia’s exports ranging from wine, lobsters, and of course, coal.
As China-Australia trade tensions thaw, the land Down Under stands to reap the benefits as the world’s second largest economy continues with its reopening.
Furthermore, the Australian economy is expected to fare much better in 2023 and be the exception to the forecasted global recession this year, as recently predicted by the IMF.
Hence, such optimism has seen AUD advance against all of its G10 peers since the start of the year, with AUDUSD yesterday punching its way to its highest levels since June, before easing slightly.
However, prices have been consolidating around the 50% Fibonacci retracement level for AUDUSD’s peak-to-trough performance over the past two years.
Note that the support/resistance levels above are derived from AUDUSD’s price action at the time this Week Ahead article is published, hours before the release of the US nonfarm payrolls due later today (Friday, February 3rd).
Signs that the US jobs market is weakening:
… would burnish hopes that the Fed has to pause its rate hikes sooner rather than later.
Such expectations might potentially drag the US dollar lower while offering a boost to AUDUSD.
In other words, today’s NFP report could have major sway on AUDUSD’s performance, even before the RBA would have its potential say on the Aussie.
ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com
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