- AUD/USD bulls look to engage at daily support stricture following 50% mean reversion.
- The markets are weighing the RBA vs the Federal Reserve and interest rate lift-off timings.
AUD/USD ended a strong performing week mixed on Friday as investors continued to unload long US dollar positions that benefited from an increase in bets that the Federal Reserve will raise rates sooner than previously expected. AUD/USD ended flat on the day near 0.7465 after trading between 0.7453 and 0.7512.
Federal Reserve Chairman Jerome Powell spoke on Friday and explained that the Fed should begin reducing its asset purchases soon, but should not yet raise interest rates. The chairman noted argued that employment is still too low. Additionally, he explained that high inflation will likely abate next year.
RBA in focus
Meanwhile, the Reserve Bank of Australia intervened for AUD 1bn on Friday to defend its 0.10% yield target on the April 2024 government security. RBA intervention is likely to continue until it formally announces that it is dropping its YCC.
On the fundamental side of things, the Evergrande story in China has cooled which has been underpinning AUD demand as traders get set for the nation's third-quarter Consumer Price Index. Consensus is reported at 3.1% for the headline rate. However, observers note New Zealand’s very strong (4.9%) read for the same quarter.
With that being said, decreasing price pressures could all but underpin the RBA’s dovish stance and thus lead to re-pricing of tightening expectations (40bp priced in for the next year) and weigh on AUD.
AUD/USD technical analysis
The price is ripening for an upside extension from daily support towards the 0.77 figure. This follows a correction to the 50% mean reversion of the latest daily bullish impulse.