USD

  • The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement.
  • Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
  • The US Core PCE yesterday came in line with forecasts with the disinflationary progress continuing steady.
  • The labour market is starting to show weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board.
  • The latest US PMIs came basically in line with expectations with a miss in the Manufacturing index and a beat in the Services measure.
  • The US Consumer Confidence this week beat expectations although the details about the labour market continued to weaken.
  • The hawkish Fed members recently shifted their stance to a more neutral position.
  • The market doesn’t expect the Fed to hike anymore.

AUD

  • The RBA raised the cash rate by 25 bps as expected as the central bank judged that the move was warranted to be more assured that inflation would return to target in a reasonable timeframe.
  • The recent Monthly CPI report missed expectations across the board which is a welcome development for the RBA.
  • The RBA Governor Bullock has been leaning on a more hawkish side recently, although she remains optimistic on the future outlook.
  • The labour market continues to weaken as seen also recently with the bulk of jobs added being part-time.
  • The wage price index surprised to the upside as wage growth in Australia remains strong.
  • The recent Australian PMIs fell further into contraction for both the Manufacturing and Services sectors.
  • 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 AUDUSD rejected perfectly the key trendline around the 0.6675 level where we had also the 61.8% Fibonacci retracement level for confluence. The sellers piled in with a defined risk above the trendline to position for a drop into new lows with the first target being the support zone around the 0.65 handle.

AUDUSD Technical Analysis – 4 hour Timeframe

AUDUSD Technical Analysis
AUDUSD 4 hour

On the 4 hour chart, we can see that the price has been diverging with the MACD into the key trendline. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it was another bearish confluence for the sellers which was further supported by the rising wedge formation, which is considered as a reversal pattern. The breakout of the wedge might be another confirmation for the sellers that we will likely see at least a deeper pullback into the 0.65 handle. The buyers, on the other hand, will likely lean on the support to position for a rally with a better risk to reward setup and target the break above the trendline.

AUDUSD Technical Analysis – 1 hour Timeframe

AUDUSD Technical Analysis
AUDUSD 1 hour

On the 1 hour chart, we can see that the price yesterday pulled back from the selloff following the breakout of the wedge. The sellers leant on the downward minor trendline as they keep targeting the support around the 0.65 handle. A break below the current minor support around the 0.66 handle is likely to trigger another wave of selling as the sellers will increase their bearish bets into the support. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and target a break above the major trendline.

Upcoming Events

Today, the main event will be the release of the US ISM Manufacturing PMI which missed expectations by a big margin the last time. A strong report is likely to give another boost to the US Dollar while weak figures could weigh on the greenback in the short term.

See the video below