AUD/USD Faces Hawkish RBA and Key Economic Data Releases

The Australian dollar is facing a crucial week ahead of the Reserve Bank of Australia (RBA) meeting and the release of key economic data. Despite the RBA's hawkish commentary last week, which suggests a hike in interest rates, the employment report has complicated the picture. The job growth was largely driven by part-time work, while full-time jobs decreased, and the unemployment rate remained steady at 4.65%, which could have been rounded up to 4.7%. This has left traders uncertain about the RBA's next move.

The US dollar index reached a two-month high last week, pushing the AUD/USD pair down for a third consecutive week. However, with key data releases in Australia and the US this week, including PCE inflation, nonfarm payrolls, and ISM manufacturing, traders will reassess their expectations about the Federal Reserve's rate outlook.

AUD/USD technical analysis suggests that the US dollar remains the dominant driver of currency markets, with a correlation of -0.95 with DXY over both 10 and 20 days. China-sensitive markets are also providing useful confirmation, with AUD/USD showing strong positive correlations with CNH/USD, iron ore, and the CSI 300.