The pair will likely resume the bearish trend as bears target the key support level at 0.7100.
AUD / USD traded in a narrow range on Monday morning as investors assessed the impact of US jobs data on Fed policy. In addition, the market is monitoring the impact of the growing number of Covid-19 cases in the United States and Australia.
Fed and RBA policies
The Federal Reserve and the Reserve Bank of Australia (RBA) have moved relatively synchronously over the past few months.
Both central banks are still implementing quantitative easing (QE) policies with the aim of supporting their respective economies. Unlike the Bank of England (BOE) and the Reserve Bank of New Zealand (RBNZ), the two banks have yet to start raising interest rates.
This trend could change this year even as both countries experience a sharp increase in the number of Covid cases. In the United States, the number of new cases on Sunday exceeded 600,000 as more than 1,200 people have died. In Australia, the number of daily cases has jumped to over 70,000. However, on the bright side, the death rate is significantly low given that the Omicron variant is a bit mild.
AUD / USD is also in a narrow range as investors assess the latest US employment figures. On Friday, official US government figures showed the economy created just 199,000 jobs as of December last year. This was significantly lower than the median estimate of 422,000.
While the overall figure was low, economists praised the positive sides of the data. For example, the unemployment rate, to which the Fed pays close attention, has fallen to a low of 3.9% during a pandemic.
This figure has steadily declined after peaking at 14.5% in 2020. Wages also rose 0.6% in December. Therefore, analysts believe the RBA and Federal Reserve will maintain a hawkish tone this year.
AUD / USD forecast
The four hour chart shows that the strong rally in AUD / USD found strong resistance at the 0.7275 level. This price was also along the 50% Fibonacci retracement level. It is now slightly lower than the 25 and 50 day moving averages as the Stochastic Oscillator has moved slightly above the oversold level of 19.
Therefore, the pair will likely resume the downtrend as the bears target the key support level at 0.7100. This view will be invalidated if the price manages to break above the key resistance at 0.7275.