11.01.202210:55 Forex Analysis & Reviews: AUD/USD. Australia's retail sales data and Powell's false start

The AUD/USD pair approached the borders of 0.72 again today, amid a strong report on retail sales in Australia and another wave of weakening US dollar. The Australian dollar received slight support, but there is no need to rush to open longs as the situation for the pair is ambiguous. Traders of AUD/USD cannot determine the direction of movement, despite the strong intraday volatility. Looking at the weekly chart of the pair, it can be seen that the AUD/ISD bears tested the key support level of 0.7000 at the end of November last year, but failed to break through it. After several unsuccessful attempts, bulls took the lead who passed more than 250 points during December, reaching the level of 0.7277 before the New Year. However, the upward impulse has faded in this price area: dollar bulls came out of the pre-holiday delayed activity and acted as a counterbalance. As a result, the Australian dollar was stuck in the 0.7150-0.7280 range.

During today's Asian session, Australia released its November retail sales report. The release was in the "green zone", exceeding the forecast level twice. With a growth forecast of 3.5%, this indicator surged to the level of 7.3%. This is the best result since July 2020. At that time, the country was taking a break between lockdowns, as a result of which consumer activity has largely increased. Also last November, Australia significantly eased quarantine restrictions, which many of their residents took advantage of.

Following the strong report in the retail sector, another report was published, which was a little bit disappointing. It became known that Australia's trade balance in December fell to 9 billion, reporting to 423 million against the forecast of 10 billion 600 million (the previous value was 11 billion 220 million).

However, buyers of AUD/ USD actually ignored this release. During Tuesday's Asian session, EUR/USD bulls showed a fighting spirit, but they did not dare to attack the level of 0.72. This is very alarming for those who are determined to open long positions on the pair since last Friday, buyers of the pair have approached the 0.7200 mark three times, but they retreated from this target every time. Given the upcoming fundamental events, it can be assumed that traders will remain within the above range.

During the US session (approximately 15:00 Universal time), Jerome Powell will speak at the US Senate Banking Committee at a hearing to approve his candidacy for a second term as the Fed Chairman. Reuters released the text of his prepared speech yesterday afternoon, which is rather mysterious, not giving any clear specifics. In particular, Powell says that the Fed should prevent high inflation from becoming sustainable. To do this, the Fed will use its monetary policy tools to achieve maximum employment, price stability, and support the economy and the labor market. At the same time, he positively assessed the latest trends, stating that the US economy is growing at the maximum pace, and the labor market is in "good shape." As for the prospects of monetary policy, the head of the Fed noted that he is determined to "firmly make the necessary decisions objectively and impartially."

It can be noticed that the contents of the speech are too general and non-specific. Therefore, the dollar pairs actually ignored this unexpected release yesterday. The US dollar strengthened slightly throughout the market but then lost ground, in anticipation of the actual speech. Besides the prepared speech, Powell will answer more "lively" questions from senators.

Therefore, dollar pairs can demonstrate quite strong volatility tonight, especially if the forecasts of some experts come true. In particular, TD Securities analysts are confident that the Fed chairman will hint at a faster rate hike and a reduction in the size of the balance sheet. If he really voices such theses, then the probability of tightening monetary policy this spring (either at the March or May meeting) will increase in many ways. The US dollar will receive support, while the Australian one will be under pressure, given the RBA's extremely restrained attitude.

Technically, the AUD/USD pair is in between the middle and lower lines of the Bollinger Bands indicator on the D1 timeframe, as well as under the Kumo cloud and the Tenkan-sen line, but above the Kijun-sen line. It will be possible to talk about the development of a massive correction only when buyers break through the average line of the Bollinger Bands, that is, the level of 0.7200 and consolidate above this target. At the moment, it is advisable to take a wait-and-see attitude, given today's speech by Jerome Powell and tomorrow's inflation release. The US dollar has currently retreated amid a decrease in the yield of treasuries, but it can recover for the lost time within the next two days.