US DOLLAR PERSPECTIVE: AUD / USD PRICE ACTION MEASURED BY DUE RBA DECISION
- The US dollar gained ground in all major currencies during Monday’s trading
- The DXY index jumped 0.5% in the session, extending its recovery to eight-week highs
- AUD / USD price volatility is expected to accelerate due to Reserve Bank of Australia event risk
- Learn more about the basics of technical analysis or implied volatility trading strategies
The US dollar advanced broadly on Monday, with bulls continuing to drive the recovery. The strength of the US dollar was notable in EUR / USD and USD / CAD, particularly during the session. The DXY index is now trading at its highest level in eight weeks, after the last 0.5% gain. Not to mention that the ongoing recovery pushed the US dollar back above its 50-day simple moving average for the first time since early November.
DXY – US DOLLAR INDEX PRICE TABLE: DAILY TIME TABLE (20 OCT 2020 TO 1 FEB 2021)
Graph by @RichDvorakFX created using TradingView
This leaves the DXY Index flirting with the technical resistance represented by the 91.10 price level, which is emphasized at the close of December 9th. The upper Bollinger Band also appears to be keeping advances relatively contained, but its expanding width is remarkable and can facilitate greater potential.
The highest follow-up could see the simple 100-day moving average come into focus. That said, the US dollar may face headwinds due to a lower setback in the VIX ‘fear meter’. This means that a drop in the VIX Index normally corresponds to a mechanical reduction in the demand for safe-haven currencies.
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PRICE PERSPECTIVE IN USD – IMPLIED VOLATILITY TRADING RANGE IN US DOLLAR (NIGHT)
The AUD / USD price action is expected to be the most active during Tuesday’s trading session. Judging by AUD / USD overnight the implied volatility of 14.3%, which is the highest reading in the entire G10-FX. The implied volatility of AUD / USD is likely to be high due to the risk of a deck event surrounding the Reserve Bank of Australia.
The February 2021 RBA rate decision is expected to be released on Tuesday, February 2nd at 03:30 GMT. AUD / USD could trade in front of you in the wake of the RBA’s decision if the central bank leaves monetary policy unchanged as widely expected. This is considering that interest rate futures traders have fixed the price with a probability of about 30% that the RBA will reduce rates before the event.
Continue reading – US dollar technical forecast: DXY, EUR / USD, GBP / USD, AUD / USD
— Written by Rich Dvorak, Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for a real-time view of the market