Fundamental Overview
The USD continues to reign supreme despite the lack of catalysts. The main culprit for the recent strength in the US Dollar has been the rally in long term Treasury yields. The yield curve is bear flattening which is what you would expect with higher growth and potentially higher inflation expectations.
The catalyst for this was of course the latest FOMC decision and the US NFP report added fuel to the fire. There’s also been a good argument that the markets are already positioning for a Trump victory which is expected to strengthen the higher growth and less rate cuts expectations.
For now, this is the trend and it’s generally a bad idea to fight such trends without a catalyst. Unfortunately, we don’t have much left for October as the main events will be in the first weeks of November when we will get the top tier economic reports, the US elections and the FOMC decision.
On the AUD side, the latest data has been pretty strong with the Australian labour market report last week beating expectations by a big margin. Although it didn’t change much in terms of interest rate expectations, it reinforces the RBA’s hawkish stance.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that AUDUSD is getting closer to the 0.6622 level. If the price gets there, we can expect the buyers to step in with a defined risk below the level to position for a rally back into the 0.68 handle. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 0.64 handle next.
AUDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the bearish momentum slowed down as the lower lows became shallower. We have a downward trendline defining the current momentum. The sellers will likely keep on leaning on it to position for new lows, while the buyers will look for a break higher to start targeting the 0.68 handle.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor support zone around the 0.6650 level. The sellers will want to see the price breaking lower to increase the bearish bets into the 0.6622 level, while the buyers might try to step in for a pullback into the trendline. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the Australian and US Flash PMIs, and the US Jobless Claims figures.