US:
- The Fed hiked by 25 bps as expected and kept everything unchanged at the last meeting.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- Inflation measures since then showed further disinflation.
- The labour market displayed signs of softening although it remains fairly solid.
- Overall, the economic data started to surprise to the downside lately.
- Last week the ISM Services PMI and Jobless Claims surprised to the upside.
- The Fed members are leaning more towards a pause in September.
- The market doesn’t expect the Fed to hike at the September meeting, but there’s now a 50/50 chance of a hike in November.
Australia:
- The RBA kept its cash rate unchanged as widely expected as they are seeing signs that the economy is indeed slowing and that will help to return inflation back to target.
- The data is supporting the RBA’s stance as the Australian jobs, wages and inflation data all missed expectations lately.
- The Australian PMIs also missed expectations remaining in contraction.
- RBA Governor Lowe in his speech reaffirmed that if inflation remains sticky, they will have to tighten more.
- The market expects the RBA to hold rates steady at the next meeting as well.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that AUDUSD seems to be stuck in a range between the 0.6370 support and the 0.6500 resistance. The recent bounce is getting rejected by the red 21 moving average as the sellers are stepping in here to position for further downside. A break above the moving average should lead to a rally into the 0.65 resistance.
AUDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a divergence with the MACD recently which is usually a sign of weakening momentum often followed by pullbacks or reversals. The target of the pullback should be the 0.66 handle but if the US data comes out much stronger than expected, then the pair should keep on dropping and make new lower lows.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have clear levels where the price should react to. A break above the current resistance around the 0.6440 level should see more buyers piling in to target the 0.6500 resistance. Another option for the buyers with an even better risk to reward ratio would be to wait for the price to pull back into the 0.6410 support and position for a rally into the 0.65 resistance with a defined risk just below the level.
The sellers, on the other hand, are likely to step in at the 0.6440 resistance with a defined risk above the level to position for a break below the 0.6410 support and eventually a break below the 0.6370 level.
Upcoming Events
This week we have many important events beginning with the US CPI tomorrow, which is expected to show an increase in headline inflation but further disinflation in the core measure. On Thursday, we will see the latest Australian Jobs report followed by US Jobless Claims, PPI and Retail Sales data. Finally on Friday, we get the University of Michigan Consumer Sentiment report.