AUD/USD January Opening Range In Focus As RSI Sell Signal Emerges

AUD/USD approaches last week’s low (0.7642) following the limited reaction to the US Non-Farm Payrolls (NFP) report, and swings in investor confidence may continue to sway the exchange rate as the Reserve Bank of Australia (RBA) acknowledges that “the improvement in risk sentiment has also been associated with a depreciation of the US dollar and an appreciation of the Australian dollar.”

Nevertheless, the contraction in US employment may encourage the Federal Reserve to further utilize its non-standard tools as Vice-Chair Richard Clarida insists that the Federal Open Market Committee (FOMC) “will continue to increase our holdings of Treasury securities by at least $80 billion per month and our holdings of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward our maximum-employment and price-stability goals.”

The comments suggests the FOMC will retain the current course for monetary policy at its next interest rate decision on January 27, and the central bank may continue to strike a dovish forward guidance as Chairman Jerome Powell and Co. remain “committed to using our full range of tools to support the economy and to help ensure that the recovery from this difficult period will be as robust as possible.”

Until then, key market themes may influence AUD/USD as the US Dollar still reflects an inverse relationship with investor confidence, and the tilt in retail sentiment also looks poised to persist as traders have been net-short the pair since November.

Image of IG Client Sentiment for AUD/USD rate

The IG Client Sentiment Report shows 43.39% of traders are net-long AUD/USD, with the ratio of traders short to long-standing at 1.30 to 1. The number of traders net-long is 10.56% higher than yesterday and 28.68% higher from last week, while the number of traders net-short is 10.26% higher than yesterday and 13.41% lower from last week.

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