AUD/USD traders eye the RBA for the week ahead

• AUD/USD bulls are trying to hold onto the 0.68 figure ahead of the open.
• The week ahead could be bullish for the Aussie with the RBA expected to hike and technicals in favour. 

AUD/USD ended last Friday higher by around 0.3% on the day after climbing from a low of 0.6779 to a high of 0.6855, closing around 0.68065. However, worries about demand from China and Europe are weighing on key resource prices with China locking down the important industrial city of Chengdu at the same time that the energy crisis in Europe risks sending the euroland into a recession.

With that being said, the Aussie can benefit from higher prices for coal and LNG, something which the Reserve Bank of Australia will be taking into consideration this week when it meets to decide upon the OCR.  Despite the weakness in commodities, the RBA index of commodity export prices is still up 18% for the year so far owing to the rising prices of energy and the nation's net energy export status. The central bank is on Sept. 6 and the market and the board is leaning heavily toward a 50-basis-point move to 2.35% with an additional rate hike in the pipeline.

We & the market expect the RBA to hike the cash rate 50bps at its Sep Board Meeting, analysts at TD Securities said. ''The cash rate remains below neutral and data has generally been firm. Of more interest is whether Governor Lowe mirrors an urgency to get on top of inflation like the Fed/BoC/RBNZ.''

Meanwhile, the US dollar eased from a 20-year high on Friday following a disappointment in the Nonfarm Payrolls that showed that US hiring had climbed more than expected in August, albeit, wage growth moderated and the Unemployment Rate ticked higher. The Unemployment Rate came in at 3.7% vs. 3.5% expected and Average Hourly Earnings missed the mark as well, at 0.3% month on month vs. 0.4% expected.

The market initially dialled down its expectations of a 75 basis point hike from the Federal Reserve at the next meeting later this month, however, the Participation Rate was higher, potentially explaining the higher Unemployment Rate. to this extent, there was a lot of volatility around the report. Fed funds futures were unchanged after the jobs report and are pricing about a 75% chance that the Fed hikes rates by 75 basis points this month, according to Refinitiv data, which could be supportive for the greenback in the lead into the Federal Reserve this month. 

We will be in thin trading due to the long North American Labor Day weekend, so technically, we could see some further corrective price action across the charts, with the US dollar hanging at the edge of a key support structure and the Aussie balancing on the 0.68 round number. 

AUD/USD technical analysis

The price is balanced around the 0.68 figure and should support hold, or even the 0.6775 level to the downside, then there are bullish prospects towards the mid-week highs on the way towards 0.6880/6900. The Shark on the following US dollar chart is also adding fuel to the bullish bias in AUD/USD: