AUDUSD Fundamental Analysis

US

  • The Fed left interest rates unchanged as expected at the last meeting.
  • The macroeconomic projections were revised higher, and the Dot Plot showed that the FOMC still expects another rate hike by the end of the year with less rate cuts projected in 2024.
  • Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
  • The US Core PCE last week came in line with expectations, so the market’s pricing barely changed.
  • The labour market remains pretty resilient but we are starting to see some weakness as Continuing Claims missed expectations once again last week pointing to an upward trend.
  • The US Retail Sales recently beat expectations by a big margin with positive revisions to the prior figures, suggesting the consumers’ spending remains solid.
  • The recent US PMIs showed that the economy now looks more balanced.
  • Fed Chair Powelland other FOMC members continue to highlight the rise in long term yields as doing the job for the Fed and therefore they are expected to keep rates steady this week.
  • The market doesn’t expect the Fed to hike anymore.

Australia

  • The RBA kept interest rates unchanged as expected as they are seeing inflation returning to target with the current level of interest rates.
  • The CPI report last week surprised to the upside prompting the market to price in a higher chance of another rate hike from the RBA in November.
  • The labour market continues to weaken as seen also recently with the miss in the employment change and the losses in full-time employment.
  • The RBA Governor Bullock downplayed the beat in the CPI data and made the market to pare back the rate hike bets.
  • The Australian Manufacturing PMI fell further into contraction with the Services PMI plummeting back into contraction as well.
  • The recent RBA Minutes were surprisingly hawkish but as we have seen last week, the RBA needs more data before deciding on another rate hike.
  • The market expects the RBA to hold rates steady at the next meeting.

AUDUSD Technical Analysis – Daily Timeframe

AUDUSD Technical Analysis
AUDUSD Daily

On the daily chart, we can see that the AUDUSD pair has been diverging with the MACD for a long time as the bearish momentum continues to weaken amid a prolonged consolidation. Yesterday, the price broke above the upper bound of the triangle pattern, and it’s now testing the key resistance zone around the 0.6380 level. This is where the sellers are likely to step in and defend the level as a further extension to the upside might trigger a rally back to the 0.65 handle.

AUDUSD Technical Analysis – 4 hour Timeframe

AUDUSD Technical Analysis
AUDUSD 4 hour

On the 4 hour chart, we can see more closely the recent breakout with the price retesting the broken trendline and continuing higher. Here’s where the battle is going to be more tough, but the odds are now skewed towards the upside unless we see the AUDUSD pair falling back below the trendline leaving behind a fakeout.

AUDUSD Technical Analysis – 1 hour Timeframe

AUDUSD Technical Analysis
AUDUSD 1 hour

On the 1 hour chart, we can see that we are starting to see a divergence with the MACD right around the resistance zone. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might see another push to the upside into the 0.64 handle where the price will complete the rising expanding wedge pattern. This is a reversal pattern, so the sellers will want to wait around the highs to position for another drop with a great risk to reward setup. If the price were to break to the upside anyway though, the bearish setup would be invalidated and the buyers will have a free road to target the 0.65 handle.

Upcoming Events

This week, we will get lots of tier one data points with the US labour market and the FOMC decision in focus. Today, we have the US Employment Cost Index and the Consumer Confidence report. Tomorrow, it will be the time for the US ADP, the ISM Manufacturing PMI, the Job Openings data and the FOMC rate decision. On Thursday we will have the US Jobless Claims data, while on Friday we conclude the week with the US NFP report and the ISM Services PMI.