AUD/USD Outlook: Bears have the upper hand near YTD low ahead of RBA on Tuesday
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The AUD/USD pair stages a modest recovery from the 0.6485 area, or its lowest level since November 17 touched this Monday and trades with a mild positive bias during the early European session. The USD struggles to capitalize on its modest intraday uptick to a nearly two-month peak and fails ahead of the 100-day Simple Moving Average (SMA), which, in turn, is seen as a key factor lending support to spot prices. Investors further scaled back their expectations regarding the timing and pace of rate cuts by the Federal Reserve (Fed) in the wake of Friday's blockbuster US jobs data. The headline NFP showed that the US economy added 353K new jobs in January as against the 180K anticipated. Moreover, the previous month's reading was also revised higher to 333K from the 216K reported. Meanwhile, other details of the report revealed that the unemployment rate held steady at 3.7% and Average Hourly Earnings rose to 4.5% on a yearly basis, both beating consensus estimates. Adding to this, Fed Chair Jerome Powell, speaking in an interview with the US TV show 60 Minutes, reiterated that the March meeting is likely too soon to have the confidence to start cutting interest rates. The markets were quick to react, with the probability of a 150-bps rate cut in 2024 dwindling to just 25% from being nearly certain previously. This, in turn, remains supportive of a further rise in the US Treasury bond yields and favours the USD bulls. Furthermore, geopolitical risks stemming from conflicts in the Middle East, along with worries about slowing economic growth in China, temper investors' appetite for riskier assets. This further benefits the safe-haven Greenback and contributes to keeping a lid on the risk-sensitive Aussie. Bulls might also refrain from placing aggressive bets around the Australian Dollar (AUD) in the wake of growing acceptance that the Reserve Bank of Australia's (RBA) tightening cycle is over and that the next move would be down. The bets were lifted by soft consumer and producer inflation data released last week, which ramped up expectations that prices will fall at an accelerated pace in the coming months. Hence, the market focus will remain glued to the RBA monetary policy meeting on Tuesday. From a technical perspective, Friday's close below the 100-day Simple Moving Average (SMA) for the first time since November was seen as a fresh trigger for bearish traders against the backdrop of last week's breakdown through a short-term range. Apart from this, oscillators on the daily chart are holding deep in the negative territory and are still away from being in the oversold zone. This, in turn, validates the near-term negative outlook for the spot prices, suggesting that any subsequent move-up might still be seen as a selling opportunity.
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