Back To Where We Started

A mixed session for the greenback saw AUD/USD rise to 0.7755 before dropping back to oscillate around neutral levels into the close; DXY remains either side of the 50-dma at 90.459. AUD was supported by gains in the commodity complex, iron ore saw prices back above $160/t as markets put bets on Chinese demand increasing after LNY.

• The pair last changes hands around the 0.7720 handle, marginally higher on the session.
• In a note CBA says: "How Chinese demand for iron ore develops post the New Year Holiday Period will be an important driver of AUD direction. The risk that Chinese steel production, and therefore iron ore demand, falls is a major downside risk facing AUD."
• Locally, a BBG interview with RBA board member Harper saw focus full on the remaining excess capacity in the Australian economy, while he played down the risk of asset bubbles. On QE, Harper noted that the pace of the economic recovery, in both local and global terms, in addition to actions by other central banks are the main factors that will determine whether the Bank's bond buying scheme is extended again.
• The Feb 5 price action highlights a reversal signal following last week's inability to clear the 50-day EMA. The pair has breached resistance at 0.7704, Jan 29 high and this signals scope for a climb towards 0.7782/0.7820, the Jan 21 high and Jan 6 high respectively. The latter is also a bull trigger. On the downside, a break of 0.7564, Feb 2 low would resume recent bearish pressure.
• The February reading of consumer inflation expectations are the only data point on the docket today, due at 0000GMT/1100AEDT. It is expected to be a quiet session with many markets in the time zone away for LNY celebrations.