Neutral Day, Data Eyed

After an impressive rally to fresh cycle highs over the last few days, AUD/USD finished marginally lower on Tuesday. The greenback was slightly softer after Fed Chair Powell reiterated that the recovery still has some way to run and downplayed concerns about a surge in inflation.

• The rate could be confined to current ranges with sizable option expiries later in the week, around $4bn of 0.7900 strike puts expire on Feb 26.
• AUD is supported by commodity prices, oil extended its rally yesterday while iron ore prices dipped but remain around $170/t.
• From a technical perspective AUD/USD maintains a bullish posture and once again traded higher still early Tuesday. Price action on Feb 5 highlighted a reversal signal following the inability to clear the 50-day EMA. The pair has breached resistance at 0.7820, Jan 6 high as well as 0.7915, hitting the bull trigger in the process. This opens vol band resistance at 0.7955. On the downside, a break of 0.7564, Feb 2 low is required to highlight a broader reversal. Initial support lies at 0.7718, the 20-day EMA.
• Looking ahead Q4 wage price index is due at 0030GMT/1130GMT, consensus is for a 0.3% Q/Q rise. CAN says "We expect wage growth to remain weak at only 0.3%/qtr (1.1%/yr). The RBA has mentioned a number of times a substantial lift in wages will be required to return inflation, sustainably, to its 2‑3%/yr inflation target. The implication is RBA rate hikes are a long way off." Markets also await the RBNZ rate announcement.