Fundamental view:

The Australian dollar advanced against the US dollar for a third consecutive week. Aussie was favored by the rising gold prices amid the weak US dollar due to dovish Fed. However, The Russia – Ukraine saga soured the market sentiment prompting the traders towards the safe haven asset – Gold. Russia deployed troops to the region, and Western nations feared an invasion. Moscow wants Ukraine to be permanently barred from joining the North Atlantic Treaty Organization  (NATO) and want to cease all military activity in Eastern Europe. The West has aligned behind Kyiv, and at some point, Russia announced it would pull back troops, although in reality, it has done the opposite.  Risk off sentiment intensified on the US’s warnings over a potential Russian incursion of Ukraine.

The FOMC meeting minutes was released on Wednesday. Inflation was mentioned 73 times in the text, indeed a record , we do not know how many of the more than 70 people present spoke. Policymakers supported a significant reduction in the balance sheet given its “high level of Federal Reserve securities holdings.”  No indication was given for the timing or size of the expected reduction or whether it might be a passive roll-off or active sales. And no clue was provided to the question,  will the March rate cut be 0.25% or 0.5%.  On the other hand, Minutes from the Reserve Bank of Australia showed that policymakers are willing to be patient on inflation. The RBA stated that wages continue to lag and do not expect them to reach the desired levels until 2024. Hence, a rate hike will have to wait until then.

In this week, US PPI monthly report on 15^th February and Australia Employment Change on 17^th February favored bearish trend whereas US EIA Crude Oil Stocks Change and FOMC meeting on 16^th February, US initial jobless claims on 17^Th February favored bullish trend for the pair.

The major economic events deciding the movement of the pair in the next week are Fed Governor Bowman Speech at Feb 21, RBA Assistant Governor Kent Speech, US CB Consumer Confidence Index at Feb 22, Australia Wage Price Index quarterly report at Feb 23, US GDP quarterly report, Initial Jobless Claims, EIA Crude Oil Stocks Change at Feb 24, US Core Durable Goods Orders monthly report and Michigan Consumer Sentiment at Feb 25.  

AUD/USD Weekly outlook:

Technical View:

Last week’s high was 0.29% lower than the previous week. Maintaining high at 0.7227 and low at 0.7085 showed a movement of 142 pips.

In the upcoming week we expect AUD/USD to show a bullish trend.  The currency pair is trading above the 200 Simple Moving Average and the MACD trades to the upside. A solid breakout above 0.7238 may open a clean path towards 0.7304 and may take a way up to 0.7380. Should 0.7096 prove to be unreliable support, the AUDUSD may sink downwards 0.7020 and 0.6954 respectively. In H4 chart cup and handle pattern formation favors prospects of a bullish trend. Also to be noted Bullish harami formation exerts the expectation of uptrend for the pair.