The Australian dollar pulled back slightly on Tuesday after the Reserve Bank of Australia (RBA) released minutes of its last monetary policy meeting and as traders waited for key macro data from the country. The AUD/USD pair was trading at 0.7060 on Tuesday, down a bit from the year-to-date high of 0.7145.
Australia jobs report ahead
The AUD/USD pair retreated after the Reserve Bank of Australia released minutes of the last monetary policy meeting, in which officials, led by Michelle Bullock, decided to hike interest rates by 0.25% to 3.85%.
The minutes provided more information about the deliberations that took place in that meeting, with most officials expressing concerns about the elevated inflation. Recent data showed that the headline Consumer Price Index (CPI) remained above the mid-point of the 2-3% target.
At the same time, the labor market remains at full capacity, with the unemployment rate falling to a historical low of 4%, a trend that may continue in the near term.
The next key AUD/USD news will come from Australia on Wednesday when the statistics agency publishes the closely-watched wage price index data. Economists expect the report to show that the wage price index rose 3.4% in the fourth quarter.
The statistics agency will then release the official jobs numbers on Thursday this month. Economists polled by Reuters and Bloomberg expect the report to show that the unemployment rate rose slightly to 4.2% as the economy created over 20,000 jobs, much lower than the 65k it created in December. The participation rate is expected to move from 66.7% to 66.8%.
A strong jobs report will raise the possibility of another rate hike, possibly in March. This rate decision will also depend on the upcoming Australian inflation report, which will come out on Wednesday next week.
Economists expect the data to show that the headline Consumer Price Index dropped from 3.8% in December to 3.6% in Jan, while the trimmed and weighted mean figures fell to 3.1% and 3.5%.
FOMC minutes as fund managers take bearish stance on the dollar
The AUD/USD exchange rate retreated as investors waited for the upcoming Federal Reserve minutes, which will come out on Wednesday. These minutes will also provide more information on what to expect in the coming meetings.
The minutes come a few days after the Bureau of Labor Statistics (BLS) showed that the headline Consumer Price Index dropped to 2.4% in January, while the core inflation remained at 2.5%.
Meanwhile, hedge funds remain substantially dovish on the US dollar. A survey published by the Bank of America showed that fund managers’ exposure to the dollar has dropped to the lowest level since 2012.
AUD/USD technical analysis
AUD/USD chart | Source: TradingView
The weekly chart shows that the AUD to USD exchange rate has rebounded in the past few months, moving from a low of 0.5916 in April last year to the current 0.7067.
The pair has jumped above the key resistance level at 0.6943, its highest swing in September 2024. It has also formed a golden cross pattern as the 50-week and 200-week Weighted Moving Averages (WMA) have crossed each other.
The Average Directional Index (ADX) has jumped to 26, its highest level since 2022, a sign that the trend is strengthening.
Therefore, the pair will likely continue rising as bulls target the next key resistance level at 0.7500.
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