AUD/USD: all eyes will be on Aussie wages this week

• AUD/USD starts out with a bullish gap.
• Technicals are mixed.

AUD/USD is starting out the week in Asia in a quiet session while there are no events and a lack of drivers ahead of a busier domestic schedule later in the week, starting with tomorrow's speech from RBA's Ellis, then business conditions/confidence before the jobs data mid on Thursday. Currently, AUD/USD is trading at 0.7814 with a high of 1.7816 and a low of 0.7801.

AUD/USD opened with a small bullish gap on Monday after a choppy closing session o Friday where the pair opened near 0.7795 and rallied to 0.7830 on buoyant risk and options activity. Vol picked up and the higher betas were adversely affected with the Aussie dropping to 0.7775 with a slide in US equities, risk and yen crosses including AUD/JPY before risk recovered again. AUD/USD went on to close about 0.7790. 

Wages will be key this week

As for the day and week ahead, Australia’s calendar is quiet today and the week’s data highlight is Jan employment on Thursday with all eyes on wages.

"Notably", analysts at Westpac explained in respect to RBA's Governor Lowe’s speech on February 8, "the speech includes the comment that “a lift in wage growth is likely to be necessary for inflation to average around the mid-point of the ... target”".

The analysts at Westpac argued that this strongly implies that the Bank will be looking for clear evidence of a lift in wage measures before it is comfortable about the risks to its outlook. "That in turn means quarterly updates to the wage cost index (next due February 21) and national accounts (next due March 7) will be key data points for policy. Given the degree of uncertainty and the Bank’s expectation for only gradual improvement, this suggests its views will be slow to evolve, likely requiring several quarters of consistent evidence on this front," the analysts added.  

AUD/USD levels

The technical outlook is mixed with the monthly RSI biased to the downside and the daily doji and RSI divergence playing its roll in today's upside. Meanwhile, Valeria Bednarik, chief analyst at FXStreet explained that the daily chart shows that the pair settled below the 50% retracement of the December/January rally around 0.7820, while technical readings keep favouring a downward continuation:

"The pair closed far below a bearish 20 SMA, while technical indicators holding near oversold readings, barely losing their downward strength. The quite straight slump from these last days, however, may favor an upward corrective movement ahead. In the 4 hours chart, a bearish 20 SMA attracted selling interest, while technical indicators corrected from oversold readings, but lack strength enough to confirm a steeper recovery ahead," Valeria explained.