Fundamental Overview
The weak US NFP report last Friday led to a key breakout in the USDJPY pair which eventually triggered another deleveraging in the Yen carry trades. Things got dire yesterday as the Nikkei dropped 12% overnight and we saw a general selloff in global stock markets.
This led to risk-off flows and at one point, the markets saw the Fed cutting rates by 136 bps by year-end and some chances of an emergency rate cut. Although the volatility calmed down a bit, the markets are still expecting a 50 bps cut by the Fed in September and a total of 110 bps by year-end.
The AUD got pressured by the risk-off sentiment but bounced back pretty quickly erasing all the losses since last Friday. The RBA today kept interest rates unchanged as expected and pushed back against imminent rate cuts expected by the market as they want to see more evidence that inflation is moving sustainably to target.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that AUDUSD spiked lower into the April’s lows around the 0.6360 level due to the global market rout we saw early on Monday. The price eventually erased the losses, and we are now trading above the 0.6464 level.
The buyers will likely pile in around these levels with a defined risk below the 0.6464 level to position for a rally into the 0.66 handle. The sellers, on the other hand, will want to see the price falling below the 0.6464 level again to target another drop into the 0.6360 level.
AUDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we are having some consolidation around the 0.65 handle. A break above the downward trendline should give the buyers a bit more confidence and will likely increase the bullish momentum.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we are basically trading in a range between 0.6480 and 6560 levels. The buyers will want to see the price getting above the range, while the sellers will look for a breakout to the downside. The red lines define the average daily range for today.
Upcoming Catalysts
This week is basically empty on the data front. The only notable economic release will be on Thursday when we get the latest US Jobless Claims figures. The market will also pay close attention to Fed members’ comments given the latest developments in the markets.