AUD/USD weekly outlook: RBA, FOMC minutes, wages and PMIs on tap

Market drivers for AUD/USD, AUD/JPY, ASX 200

Date	AEDT (GMT +11)	Event
Monday	-	US public holiday (Washington’s birthday)
Tuesday, Feb 20	11:00	Westpac Leading Index
Tuesday, Feb 20	11:30	RBA Minutes of the Feb 2024 Monetary Policy Meeting
Wednesday, Feb 21	06:00	FOMC Minutes
Wednesday, Feb 21	11:30	Wage price index
Wednesday, Feb 21	11:30	Updated employee earnings and hours
Thursday, Feb 22	11:30	Judo Bank PMI (manufacturing, services, composite)
Thursday, Feb 22	11:30	Average Weekly Earnings
Thursday, Feb 22	11:30	Labour Force, Detailed
Friday, Feb 23	01:45	S&P Global US PMIs (manufacturing, services, composite)

RBA minutes:

On Tuesday the RBA will release the minutes of their first meeting of the year. We know from their recent statement that they still deem inflation as “too high”, and that “a further increase in interest rates cannot be ruled out”. So if the minutes are to serve any real purpose, it is to help us decipher how real the threat of another hike may be.

The December minutes cited upside risks to wage growth, but we’ll need to wait until Wednesday’s wage price index to see if wage pressures persist. And what might take the sting out of the minutes tail is that they will not capture the RBA’s thoughts on the latest employment report, which saw unemployment rise to the three-year high of 4.1%. If this is to be coupled with softer wages, then it’s possible the minutes can be all but forgotten.

FOMC minutes:

The Fed have been busy pushing back on rate cut expectation. Yet even though CPI data came in hotter than expected, markets are still trying to price in a cut as soon as May. I’d like to say that the FOMC minutes will put to bed any expectations of a cut in H1, yet traders seem highly focussed on any shred of evidence that suits their dovish market pricing. And if they think they have found what they want in next week’s FOMC minutes, that could weigh on the US dollar and propel risk higher, taking AUD/USD (and Australian dollar pairs in general) with it.

Australian wage price index:

Wages are a key inflationary input, which is why the RBA watches it closely. The wage price index (WPI) rose at a record pace of 1.6% q/q in Q3, although its momentum is not expected to be sustained as a sharp rise in minimum wages was the main culprit.

Still, for anyone wanting to see lower rates, weaker wages could help. But is debatable if they will simply roll over. And if wages remain sticky it again reduces the odds rate cuts coming sooner than later. Furthermore, CPI y/y fell to 4.1% in Q4, which means that if the annual rate of wages rises above 4.1% next week then it means ‘real’ wages have increased, which is another reason for the RBA to defer any dovish tones.

Australian flash PMIs:

The monthly PMIs provide a lead on where official growth figures are headed. And whilst growth is hardly accelerating, its decline has slowed. Manufacturing etched out a slight expansion of 50.1 in January, and the services and composite indices are not far behind at 49.1 and 49 respectively. Admittedly, Australian PMIs are rarely a market-moving event, but if they show that growth is accelerating, it provides less of a reason to be excited about a dovish RBA pivot later this year.

AUD/USD technical analysis (weekly chart):

The Australian dollar has printed two bullish pinbars over the past two weeks, which shows a reluctance for it to move immediately lower on this timeframe. And as the US dollar index has just posted its seventh consecutive bullish week but faltered at resistance around 105, it paves the way for AUD/USD to potentially bounce – but driven by US dollar weakness as opposed to AUD strength.

AUD/USD technical analysis (daily chart):

But first, I see the potential for a pullback from last week’s highs given its 3-day rally finished with a Spinning top doji around resistance (weekly high, 10-day EMA). And that could favour bears on intraday timeframes over the near-term. A break above 0.6550 brings the 66c handle into focus, near the 200-day EMA. Yet such a move would invalidate the 64c bear-flag target bias outlined last week.

For the original bear-flag target of 64c to remain intact, we likely need to see prices remain beneath last week’s high and roll over directly from here.

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.