The aussie has struggled quite a bit as of late as falling commodity added to headwinds for the currency, alongside a more sluggish risk mood on the balance of things. Against the dollar, the drop last week was somewhat salvaged towards the end as the pair averted a weekly close below key technical levels:
Both the Fed and RBA are still on the tightening path and all things considered, markets are well prepared for what both central banks are planning to do. However, the debate on the Fed's 75 bps vs 100 bps rate hike next week has stirred some things up for the dollar and we are seeing that translate to market action since last week's US CPI data.
But come Friday, markets are seemingly convinced that the Fed will stick with a 75 bps rate hike and that is seeing the dollar retreat in the past few sessions and that is carrying over to today.
For AUD/USD buyers, that is good news at least as the pair manages to salvage the technical picture in the pair as seen above. The weekly close comes above the trendline support and 50.0 Fib retracement level at 0.6757 and so those remain key technical spots to watch if sellers are to chase a further downside leg in the pair.
As we get into trading this week, the dollar remains a major focus ahead of the Fed next week. But given the shift in sentiment, it looks like we may see the greenback hold weaker to start the week with risk tones set to observe a more positive showing for now.
That might see AUD/USD retrace back towards 0.6870-80 before potentially taking aim at 0.7000 again. The latter might be where the rebound looks to stop though, as the Fed should be in focus by then and markets might move on to focus on where the central bank is looking for the terminal rate again.
As much as the dollar may be weaker now, a major softening in the greenback is still unlikely when you put together all the moving parts in the market.
