US DOLLAR OUTLOOK: AUD / USD PRICE ACTION DISCUSSED BY RBA DECISION DUE TO
- US dollar gained ground during Monday trading field by major currency pairs
- The DXY index jumped 0.5% on the session, extending its setback to eight-week highs
- AUD / USD volatility is likely to accelerate due to the eventual risk of the Reserve Bank of Australia
- Learn more about the basics of technical analysis or implied volatility trading strategies
The US dollar advanced broadly on Monday as bulls continue to drive the rebound. The strength of the US dollar was particularly noticeable during the session in EUR / USD and USD / CAD. The DXY index is now trading at its highest level in eight weeks after the latest 0.5% increase. Not to mention, the ongoing rebound pushed the broader U.S. dollar back above its 50-day simple moving average for the first time since early November.
DXY – US Dollar Index Price Chart: Daily Framework (20 OCT 2020 TO 01 FEB 2021)
Graph by @RichDvorakFX created using TradingView
This causes the DXY index to flank with technical resistance offering the 91.10 price level, which is highlighted by 09 December. The upper Bollinger band also seems to keep progress relatively constrained, but its growing breadth is remarkable and could allow for more potential upwards.
If a higher successor occurs, the simple moving average of 100 days may come into focus. That said, the U.S. dollar could face headwinds due to a retracement lower in the VIX ‘fear meter’. This is because a declining VIX index usually corresponds to a mechanical downward shift in demand for safe-haven currencies.
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PRICE FORECAST USD – US Dollar Implied Volatility Trading Series (Overnight)
AUD / USD price action is expected to be most active during Tuesday’s trading session. It is rated by AUD / USD overnight implied volatility of 14.3%, which is the highest reading in G10-FX. The identified volatility of AUD / USD is likely to have increased due to the eventual risk on the deck around the Reserve Bank of Australia.
The RBA rate decision of February 2021 must be announced on Tuesday 02 February at 03:30 GMT. AUD / USD could trade on its forefoot following the RBA decision if the central bank leaves monetary policy unchanged, as generally expected. It is the consideration of interest rate futures that has priced traders in an almost 30% probability that the RBA would lower the rates on the occasion.
Continue reading – US Dollar Technical Forecast: DXY, EUR / USD, GBP / USD, AUD / USD
– Written by Ryk Dvorak, Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insights