AUD/USD pushes back above 0.7100 as US dollar falters, Aussie outperforms despite “dovish” RBA

• AUD/USD pushed back above 0.7100 on Tuesday despite what analysts said was a “dovish” RBA meeting.
• The US dollar has been falling, risk appetite improving and base metal/energy prices rising, all contributing to AUD’s outperformance.

Against the backdrop of robust risk appetite, favorable moves in base metal and energy prices and a faltering US dollar, the Aussie’s post-“dovish” RBA policy announcement Asia Pacific underperformance is now firmly in the rear-view mirror. The currency has been climbing the G10 rankings throughout the session and is now the second-best on-the-day performer after NZD, with AUD/USD trading about 0.7% back above the 0.7100 level.

The next significant area of resistance for traders to keep an eye on is in the 0.7170 zone, which has acted as both support and resistance since mid-January and also coincides with the 21 and 50-day moving averages. With the RBA policy announcement now old news, AUD/USD is free to focus back on US themes, such as data and Fed speak. There has already been plenty of both this week and will be plenty more in the coming days.

The pair was unfazed by a slightly stronger than expected ISM manufacturing PMI survey that still showed the headline index dropping to its weakest since November 2020 and ignored a surprise rise in monthly job openings in December. While Thursday’s ISM Services PMI survey will also be worth watching, the main event of the week will be Friday’s US jobs report. Fed speakers have been emphasising a new data-dependent approach to determining the pace at which the bank tightens policy in 2022 and beyond.

If Friday’s jobs report contains fresh signs of build wage pressures and of a further tightening of the labour market, that could encourage money markets to start pricing in the chance of a 50bps hike in March again. Of course, this presents downside risks to AUD/USD towards the end of the week and should any Fed-related dollar strength come surging back, traders will be looking for a retest of January lows under 0.7000.