The AUD/USD pair is following the general trends, reflecting the US dollar's strengthening. The Australian dollar is testing the support level of 0.7700 (Tenkan-sen line on the daily chart), yielding to the bears' dominance. Considering the continuing growth of the US dollar index, we can assume that sellers will most likely enter the area of the 76th mark, designating the medium-term target in the form of 0.7630 (middle line of the Bollinger Bands indicator on the daily time frame).
However, further prospects for the AUD/USD bears look quite unclear, since the US dollar is currently rising more on emotions in view of the political crisis in the United States. The problem is that political fundamental factors are actually unreliable and temporary. Therefore, it is not worth trading on the downward trend of AUD/USD pair, especially considering the growth of Australia's macro indicators and the corresponding decline of American indicators. The latest Nonfarm, which was published last Friday, reminded us once again that the US economy is still under pressure from COVID-19. For the first time since the spring of last year, the number of people employed in the non-agricultural sector declined to 140 thousand, despite forecasting minimal growth. Other components of the release was disappointing as well. For example, the number of employees in the private sector also declined by 98 thousand.
So, as soon as politics disappears and key macroeconomic reports return in front, the US dollar will be under pressure. In this context, the release of data on the growth of US inflation scheduled on Wednesday (January 13), will be important. If this macroeconomic report disappoints the market, the US dollar's vulnerability will increase in many ways, especially when paired with the Australian dollar. According to forecasts, the general consumer price index should slightly rise – both on an annual and monthly basis (+ 0.4% m / m + 1.3% y / y). But on the contrary, the core index, excluding food prices and energy carriers, should show negative dynamics, dropping to 0.1% on a monthly basis and to 1.5% on an annual basis. If both components of the release are in the sell zone, the dollar may fall under a wave of sales, but only if the political tension in the US calms down. Otherwise, the market will use this data (as well as Nonfarm) a little later. It is most likely after the inauguration of Joe Biden, which will take place on January 20.
In other words, the latest US macroeconomic reports are considered as a "time bomb" that should be remembered when monitoring the current behavior of the US dollar. It should also be recalled that the Fed still takes a "dovish" position, intending to expand the volume of incentive programs. The minutes of the last (December) Fed meeting, which was released last week, reminded investors again that the regulator's members are disappointed with the current condition. The Fed said that the overall pace of the US economic recovery has slowed down, and the level of GDP is still much lower than before the outbreak of the pandemic. According to general forecasts, economic growth will further slowdown in the coming months as the epidemic situation worsens across the country.
In turn, Australian macroeconomic reports have recently been released in the buy zone, and RBA's rhetoric was restrained and optimistic. The unemployment rate in the country continues to gradually decline, while the number of employees is growing, which is due to the growth of the full employment component.
The commodity market is also growing. Iron ore, which is a strategically important commodity in Australia, continues to update price records. An increased demand from China has pushed spot prices of raw materials for steel production above $ 160 per tonne. Therefore, experts from Goldman Sachs believe that the upward price dynamics will continue in the medium term. The rising political conflict between China and Australia only triggers interest in iron ore, although Beijing bypasses this raw product in the confrontation with Canberra.
At the same time, China's macroeconomic data also provide indirect support to the Australian dollar. For example, it became known today that its December's consumer price index rose to 0.2% after declining to -0.5% in November. The producer price index also came out in the "green zone", showing its recovery.
In other words, the US dollar will lose its attractiveness as soon as the market changes its focus from political to macroeconomic factors. In my opinion, political news from the US will be scheduled for another 7-10 days. During this period, Congress will vote for the application of the 25th amendment to the US Constitution (a deliberately failed scenario of removing Trump from power) and for the impeachment procedure (a more likely scenario, but at the same time longer – the process itself will end after Biden takes office). After these two votes, traders' attention will gradually shift from the political background to the economic one.
In this case, there is no reason yet to discuss the completion of the upward trend of the AUD/USD pair. In my opinion, we are talking about a large-scale correction in the wake of rising anti-risk sentiment. If the downward impulse fades, which is most likely in the middle of the 76th figure, that is, in the area of 0.7630-0.7650, it will be possible in the medium term to consider buying to the level of 0.7800 – upper line of the Bollinger Bands indicator on the daily time frame.
