AUD/USD's upside stifled by broadening USD adoption

• AUD/USD testing weekly resistance and support with eyes on upside continuation. 
• AUD positioning strengthening, but USD adoption is recovering also. 

AUD/USD is flat into the bell on Wall Street this Monday, having travelled between a low of 0.7705 and a high of 0.7775. 

The commodity complex was somewhat subdued as traders brace for the Federal Open Market Committee meeting this week. 

Leading into the meeting, it should be noted that the markets have been adopting a firmer bid in the US dollar in both the spot and futures markets. 

Net USD short positions shrunk for a third consecutive week, as noted by analysts at Rabobank. 

''The USD has been one of the best performing G10 currencies in recent weeks reflecting a shift in expectations regarding Fed interest rate policy.  

Since the reflation trade is centred around US fiscal policy and growth expectations, the USD could prove to be more resilient then the consensus had been expecting at the start of the year,'' the analysts explained.  

''DXY needs to break above the 92.068 area to set up a test of last week’s high near 92.503,'' Brown Brothers Harriman argued. 

Today, DXY stands between a range of 91.54 and 91.97.

Meanwhile, the expectations from the FOMC meeting will include prospects for the 2021 growth projections to have risen sharply, due to the faster vaccine roll out and the fiscal stimulus recently approved. 

However, markets will be focussed on changes to inflation and rates projections which analysts at TD Securities argued will probably be ''modest, with the median "dot" still showing no tightening through 2023''.

''The tone will likely remain dovish,'' the analysts said.

''That said, the mean dot will probably move up slightly, and we don’t expect officials to signal any major problem with the recent backup in bond yields.''

Domestically, the week ahead will be important for the Aussie as well.

Aussie jobs data is coming up.

''We forecast headline employment to fall by 31k, much weaker than consensus and ending 4 straight months of employment gains,'' analysts at TD Securities said.

''Our Feb model NSA forecast stands at +183k but after adjusting for seasonals, we obtain a -31k SA print. Assuming the participation rate stays unchanged at 66.1% in Feb, this translates to an uptick in the unemployment rate to 6.6% in Feb from 6.4% previously.''

AUD/USD levels