BUZZ-COMMENT-RBA, tariff risks still plague AUD/USD despite bullish techs
Feb 4 (Reuters) - AUD/USD rallied above the 21-day moving average and struck a 2-session high Tuesday but the pair's upside may be limited due to threats from RBA rate cuts and ongoing U.S.-China trade tensions.
Australia price increases cooled according to Q4 CPI data which helped send interest rates broadly lower as investors pulled forward expectations for rate cuts to begin with the February 18 decision priced at 82% probability for a 25bps cut.
Trade tensions escalated as China retaliated on the U.S. by imposing tariffs of 15% and 10% on selected imports, but U.S. President Donald Trump and Chinese President Xi Jinping are expected to hold a call, which could defuse the situation.
Should an agreement be reached, riskier assets and AUD/USD could rally sharply.
An AUD/USD rally would validate technical signals highlighting upside risks.
Daily and monthly RSIs are rising after they diverged on the 58-month low struck Monday.
A monthly bull hammer has formed and two consecutive daily bull hammers have been put in place.
The monthly bull hammer formed after the 76.4% Fibo of the 0.5510-0.8007 rally was pierced. That Fibo is frequently a retracement level where existing trends reverse.
AUD/USD bulls may be rewarded handsomely if trade tensions ease and the RBA leans less dovish than rate markets expect.
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