The miss in the US CPI report triggered a heavy US Dollar selling across the board as the market started to see the end of the Fed tightening cycle. Moreover, the soft-landing narrative caused a strong positive risk sentiment in the markets as the labour market remains strong and the consumer sentiment keeps on rising.
The RBA, on the other hand, kept its cash rate unchanged with the usual hawkish comments and the promise of doing more if the data suggests so. In fact, the recent RBA meeting minutes showed that there was a strong case for a rate hike but the central bank decided that holding steady was a better choice and they will reconsider at the August meeting.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the recent rally out of the US CPI report got rejected again at the 0.69 resistance. The price was anyway overstretched at that point as depicted by the distance from the blue 8 moving average. In such instances, we can generally see some consolidation or a pullback into the moving average before another major move.
AUDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pullback has made the moving averages to crossover and the sellers are already leaning on the red 21 moving average to position for a bigger downside move. The buyers are likely to step in at the 0.6781 level where we can also find the 38.2% Fibonacci retracement level for confluence. A break below this support would see more sellers piling in and extend the selloff into the 0.6563 level.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price has been making higher highs and higher lows since bouncing near the 38.2% Fibonacci retracement level. We might be already seeing the bullish momentum increasing and the buyers getting back control. The buyers will need the price to break above the recent higher high at 0.6838 to confirm the restart of the bullish trend and position for a breakout. The sellers, on the other hand, will want to see the price breaking below the 0.6781 support to pile in and target the 0.6563 level.
Upcoming Events
Today the main event will be the US Retail Sales report. We are likely to see some US Dollar selling in case the data beats expectations as the market is increasingly confident that we will get a soft-landing. On the other hand, if the data misses expectations by a low margin, we should see some short term USD strength that is likely to be faded soon after. At the moment, the only scenario where the USD appreciates substantially seems to be the one where the data misses by a big margin causing some risk off sentiment. After the Retail Sales the market will be keeping an eye on the US Jobless Claims on Thursday.
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