AUD/USD Rebound Faces Pressure as PCI Pulls Back on Trading Data

Australian Dollar, AUD/USD, PCI, PMIs, Trading Data, Lunar New Year, OPEC – Talking Points

  • Australia’s construction index (PCI) performance fell sharply for December and January
  • Oil prices fall after nearly hitting 90 after OPEC+ agrees to increase production
  • AUD/USD Narrows Overnight Gains, Moves Slightly Lower, After Not Clearing 26-D EMA

Thursday’s Asia-Pacific forecast

The Australian dollar is slightly lower against the US dollar during early APAC trading after prices pulled out of higher intraday highs overnight. The Australian construction industry weakened significantly in December and January, according to the Ai Group’s Australian Construction Performance Index (Australian PCI). The Omicron variant was noted as a likely hindrance, with many workers clamoring due to Covid isolation protocols.

AUD/USD traders will want to watch the news wires today, while Australia’s December trade balance will cross the wires at 00:30 GMT. The country’s trade surplus is expected to grow to A$9.85 billion from A$9.42 billion in November. Australian coal prices rose more than 15% in December, a likely headwind for the trade surplus. The price of iron ore, another important Australian export, rose 18.41% in December.

Elsewhere, oil prices are under pressure after OPEC and its allies, collectively known as OPEC+, agreed on a production increase. The cartel agreed to increase 400k barrels per day at its meeting in March this week. However, members are struggling to meet their production quotas, especially Libya and Nigeria, putting pressure on spare capacity from Saudi Arabia and the United Arab Emirates (UAE).

Wall Street ended the day higher overnight, but a bad earnings report from Meta, formerly Facebook, has slashed Nasdaq futures sharply in early Asia-Pacific trading. China’s stock and bond markets will remain closed for the Lunar New Year, which could potentially drain some liquidity from the market. The US dollar fell for the third day, but that hardly helped precious metals. Later today, Japan will see Jibun Bank’s January PMIs, and South Korea will see its own PMI report on the wires.

AUD/USD Technical Forecast

AUD/USD failed to break above the declining 26-day Exponential Moving Average (EMA) overnight. Instead, prices reduced gains and fell back below the 50% Fibonacci retracement. The currency pair continued higher this week after a jump from multi-year lows where a positive RSI divergence formed. Prices could pull back to the 38.2% Fib level if bulls fail to clear the 26-day EMA.

AUD/USD Daily Chart

audusd, rsi divergence

Chart created with Trading Display

— Written by Thomas Westwater, analyst for Referus

Use the comments below to contact Thomas or @FxWestwater on Twitter