Last week, the US CPI came basically in line with expectations, but the good news is that the Core M/M reading once again printed at 0.2%. The less good news is that the US Initial Claims spiked higher, but Continuing Claims remained solid. We have already seen Claims spiking higher in the past months, so it shouldn’t be worrying yet. The long-term inflation expectations in the University of Michigan report ticked lower, so on the data side the soft-landing narrative was supported. The US Dollar, nonetheless, appreciated across the board as the attention may have turned already on the next data given the higher energy prices and China starting to stimulate more.
The RBA, on the other hand, kept its cash rate unchanged with a slight tweak to a line in the policy statement that suggests that they are leaning more on the dovish side. The data has been mixed as the Australian Jobs report surprised again to the upside but the Inflation report and the Wages data missed expectations. Nonetheless, they will see more data before the next meeting and can make a better-informed decision.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that AUDUSD has eventually reached the 0.6459 low and a break lower would open the door for a fall towards the 0.6168 level. The buyers should step in here with a defined risk below to target the 0.66 handle first and the 0.69 resistance upon a break higher. The overall bias remains bearish though, so the sellers will look at the pullbacks as opportunities to re-enter at better prices.
AUDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a divergence with the MACD right at the low. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we may see a pullback into the trendline where the sellers are likely to step in to target a break below the low. The buyers, on the other hand, will need the price to break above the trendline to gain more conviction and target new higher highs.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have also the Fibonacci levels for confluence near the trendline, so the sellers will have more defined levels where to short from.
Upcoming Events
This week is a bit empty on the data front but we will still have some top tier economic data. Today, we will see the latest US Retail Sales report with strong data expected to support the USD while weak figures likely to weigh on the greenback in the short-term. On Thursday, we have the Australian Jobs report where we will see if the data supports the RBA’s stance and then later in the day, we will see the US Jobless Claims. A big miss in Claims data should trigger some recessionary fears and send the market into risk-off ultimately weighing on the AUD and supporting the USD. On the other hand, strong data may even lead the market to expect the Fed to keep with its hawkish stance and support the US Dollar as well.
