AUD/USD is slowing down from its first tease of 0.7813, April 2018’s peak. Market awaits the policy meeting of the Reserve Bank of Australia (RBA) on February 2 for clarity, as macro assumptions outlined at last November’s Statement of Monetary Policy look jaded and needs refreshing. Reflationary trades are taking a breather, but they remain fancied on dips, per DBS Bank.
“At its last policy meeting last year, the RBA argued that it is not expecting to raise the cash target rate (currently at 0.1%) over the next three years. The market is increasingly questioning the RBA’s stance, given the backdrop of a better-than-expected economic recovery as the market moves into the vaccine optimism phase. This is likely a reason to expect AUD to still find buyers on pullback dips.”
“There is momentum loss coupled with a negative moving average convergence divergence signal – a sustained decline would have AUD/USD probe lower if it goes under the 0.7641 support.”
“Tactically, we fit a buy on dip at 0.7520, which is just slightly above the 38.2% Fibonacci retracement of 0.6991-0.7820 around 0.7504. Add at 0.7465 with an invalidation point at 0.7405.”