Trade Of The Week: AUDUSD bears to keep upper hand?

<p><strong>By <a href="http://investmacro.com/contributors/contributor-profile-forextime/">ForexTime</a> </strong></p>
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<ul>
<li>AUD down against most G10 YTD</li>
</ul>
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<li>RBA decision + US data in focus</li>
</ul>
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<li>AUDUSD bearish on D1 chart</li>
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<li>Strong USD could spell more pain</li>
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<li>Key level of interest at 0.6550</li>
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<h3>The past few weeks have certainly been rough and rocky for the Australian dollar!</h3>
<p>It has weakened against almost every single G10 currency so far in 2024, shedding over 4.5% versus the dollar.</p>
<p><img decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user17/AUD%20YTD_0.png" alt="" width="972" height="742" data-entity-type="file" data-entity-uuid="a8ec9bad-89ad-4565-99c1-17471bc66f6f" data-src="/s3-static/users/user17/AUD%20YTD_0.png" /></p>
<p>After closing almost 1% lower last Friday following the blow-out NFP report (<strong>that saw 353k US jobs added in January</strong>), the AUDUSD has entered the new week on a shaky note. It is worth noting that the commodity currency was already pressured by growth concerns and signs of falling inflation in Australia.</p>
<p><img loading="lazy" decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user17/AUDUSDDaily_28.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="0096f4e8-1c8a-44bc-a6a5-369e0a7ace55" data-src="/s3-static/users/user17/AUDUSDDaily_28.png" /></p>
<p>With the dollar set to appreciate as investors claw back bets for aggressive Fed rate cuts, this could mean more pain for Aussie.</p>
<p><strong>Here are 3 reasons why the AUDUSD is on our radar:</strong></p>
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<h3>RBA decision</h3>
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<p>The Reserve Bank of Australia is expected to leave interest rates unchanged at its February 6th policy meeting, <strong>keeping the cash rate at 4.35%.</strong></p>
<p>Signs of rapidly cooling inflationary pressures in the final quarter of 2023 have reinforced bets around the central bank’s next move being a rate cut. This development coupled with the shaky economic outlook could lend RBA doves further support.</p>
<blockquote><p><strong>Traders are currently pricing in a 67% probability of a rate cut by the RBA in June with a cut fully priced in by August 2024. </strong></p></blockquote>
<ul>
<li><strong>The Aussie is likely to weaken </strong>if the RBA strikes a dovish tone and signals that it’s next move will be a cut this year.</li>
<li>Should the RBA sound more hawkish and express intentions to keep rates higher for longer, <strong>this could push the Aussie higher.</strong></li>
</ul>
<ol start="2">
<li>
<h3>Dollar volatility</h3>
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<p>Dollar volatility could be a key theme this week as investors not only digest <strong>last Friday’s strong US jobs data</strong> but prepare for more key data and speeches by Fed officials.</p>
<p>The biggest event risk may be the <strong>US CPI revisions published on Friday.</strong> As highlighted in <a href="https://www.forextime.com/market-analysis/week-ahead-gold-set-potentially-volatile-week">our week ahead report</a>, this could heavily influence expectations around Fed rate cuts if there are any major revisions.</p>
<blockquote><p><strong>As of writing, traders are pricing in a 77% probability of a Fed rate cut by May with a cut fully priced in by June 2024. </strong></p></blockquote>
<p>These odds could look different by the end of the week depending on incoming data and Fed speeches.</p>
<ul>
<li>Should overall data and Fed speeches boost the dollar, <strong>this may drag the AUDUSD lower.</strong></li>
<li>If the dollar ends up weakening, <strong>the AUDUSD could experience a technical bounce.</strong></li>
</ul>
<ol start="3">
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<h3>Technical forces</h3>
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<p>Aussie bears are back in power after securing a <strong>daily close below the 0.6550 support</strong>. Prices are trading below the 50, 100 and 200-day SMA while the MACD trades below zero. The trend is bearish but the Relative Strength Index (RSI) is signaling that prices are approaching oversold levels.</p>
<ul>
<li>Sustained weakness below the 100-day SMA may encourage a decline <strong>towards 0.6430 and 0.6410, respectively. </strong></li>
<li>Should prices push back above 0.6550, this could open a path towards the <strong>200-day SMA at 0.6570.</strong></li>
</ul>
<p><img loading="lazy" decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user17/AUDUSDDaily4_0.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="d982834d-ad38-4f9a-8fa8-e74a63b84e40" data-src="/s3-static/users/user17/AUDUSDDaily4_0.png" /></p>
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