AUD/USD: Rising wedge confirmation, pre-Fed caution keeps bears hopeful below 0.7200

• AUD/USD consolidates the previous weekly losses, retreats from intraday high of late.
• Easing Omicron fears join market’s preparation for hawkish Fed to underpin recent risk-on mood, yields, gold both print mild gains.
• Hawkish bets on RBA gain traction after the last week’s firmer Aussie data.
• Aussie PMIs came in softer, US Markit activity numbers for January in focus.

AUD/USD pares intraday gains around 0.7180, up 0.08% on a day, following an upbeat start to the key week during the early Asian session.

The Aussie pair initially ignored mixed Australia PMIs from Commonwealth Bank (CBA) as virus updates were positive. The recovery moves gained on firmer prices of gold afterward. However, pre-Fed fears and geopolitical tension surrounding Russia-Ukraine tensions recently weighed down the Aussie prices.

That said, preliminary readings of January CBA Manufacturing PMI eased to 55.3, below 55.9 forecast and 57.4 revised down prior readings whereas Services PMI slumped into contraction territory with 45 figure compared to 51.8 expected and 55.1 prior.

Elsewhere, Australia’s daily covid infections ease for the fifth consecutive day, to recently around 28,100. However, the death toll keeps climbing and challenge the optimists.

It’s worth noting that the US State Department and UK Deputy Prime Minister Dominic Raab both flashed warnings over Russia’s preparations for invading Ukraine, which in turn magnified geopolitical fears.

Amid these plays, the US 10-year Treasury yields rose 2.4 basis points (bps) to 1.77%, after posting the first weekly decline in five, whereas the S&P 500 Futures rise 0.50% while licking the previous week’s wounds amid the mostly quiet session.

“Last week we argued the RBA would end quantitative easing in February, despite the uncertainty caused by Omicron. With the December employment report confirming the economy finished 2021 with exceptional momentum, we are even more confident about that call. Given how the labor market finished 2021, an explicit decision to move to QT is likely on the table for the February meeting,” said ANZ.

That said, AUD/USD traders will pay attention to Tuesday’s Australia Consumer Price Index (CPI) for Q4, expected 1.0% versus 0.8% QoQ prior, for fresh impulse. However, Fed’s verdict on the March rate hike will be more important to follow.

Read: Fed Preview: Three ways Powell could out-dove markets, dealing a blow to the dollar

Technical analysis

Having registered multiple failures to cross the 100-DMA, AUD/USD dropped below an ascending support line from early December 2021, forming part of a two-month-old rising wedge bearish pattern.

Given the downbeat MACD and RSI conditions, bears do have upper hands and are likely to dominate on the clear break of 0.7170.

That said, the 0.7100 threshold will be imminent support for the AUD/USD sellers to watch following the 0.7170 breakdowns.

Alternatively, a clear upside break of the 100-DMA level surrounding 0.7280 isn’t a green card for the AUD/USD bulls as the previous support line from August and a descending trend line from May, respectively around 0.7350 and 0.7400, will challenge the further upside.