• AUD / USD bulls are bracing for the next bullish impulse and a new corrective high for the next few days.
  • Risks are high for the week ahead with a focus on global COVID-19 cases and primarily US economic data.

AUD / USD ended 2021 in the limelight, adding 0.3% on Friday, hitting a high of 0.7277. However, there are a number of risky events on the U.S. calendar this week and a lot of nervousness surrounding COVID-19 to give the bulls a reason to remain cautious as the New Year begins.

From the United States, Nonfarm Payrolls will be one of the main strengths. “The COVID surge at the end of December probably came too late to prevent a recovery in the US payroll after the November gain (210,000) appeared to be held back by an overly aggressive seasonal factor,” argued TD Securities analysts.

In addition, the minutes of the last Federal Reserve meeting by the Federal Open Market Committee will be released this week. Following the FOMC’s decision to double the pace of the QE cut and the projection of a much more hawkish dot plot, attention will now turn to the elements that led to the shift in opinions among policymakers (including on “maximum employment”) after the November meeting, ” TD Securities analysts explained.

Global risks associated with COVID-19

Meanwhile, given that there is no national data on the cards for the coming week, attention could otherwise turn to the COVID-19 outbreak of Omricon in both ‘Home and Home’. outside “. While early reports suggest omicron is less deadly, it is also much more infectious and can still overwhelm health systems around the world. AUD is a high beta currency, so it is expected to struggle in such an environment in which investors will protect capital in riskier asset classes, such as global equities.

While the AUD may be affected by global risks from COVID-19, China’s northwest Xi’an industrial and technology hub is a source of concern for Australia’s economic growth and markets in general given the growing number of infections there and the impacts of the global crisis. growth due to the renewal of confinements. Despite an arsenal of some of the world’s toughest measures, China began 2022 with its highest number of local coronavirus cases for a seven-day period since the country’s first outbreak was brought under control almost two years ago. .

In addition, at the national level, the situation of COVID-19 is not better. New coronavirus infections have again skyrocketed in Australia ahead of New Year’s celebrations to a record high of over 32,000, just days after surpassing 10,000 for the first time. Experts say the explosion is due to the highly contagious variant of omicron and the recent easing of restrictions in Sydney and other areas.

“Markets will likely watch policy announcements closely as record cases suggest lockdowns may return,” TD Securities analysts said. The COVID situation in Australia appears to be concerning with NSW & VIC recording new cases of COVID daily. Hospitalizations have climbed, but the incidence of serious illness has remained low probably due to the high vaccination coverage in Australia (91% of double vaccinated). ”

The Reserve Bank of Australia on February 1 will be critical as ahead of the holiday, most observers were increasingly convinced the central bank would end quantitative easing by then. However, if omicron disrupts the economy, the RBA may have to wait completely and reconsider the situation at the May 3 meeting.

AUD / USD technical analysis

From a daily standpoint, the price action left the bull’s footprints in the form of a W formation, a new test of the neck line on a 38.2% Fibonacci retracement and an extension subsequent bullish correction. This leaves the short term bullish bias.

From an hourly point of view, however, there could be a re-accumulation process in the meantime before the next bullish move:

38.2% Fibo and 21-EMA have confluence in what should be a firm support zone in the 0.7260 range. We can see a deeper correction before the next bullish pulse and before we see a higher corrective high.