Fundamental Overview
The main culprit for the US Dollar strength lately has been the rally in long term Treasury yields. The yield curve has been bear-flattening which is what you would expect with higher growth and potentially higher inflation expectations.
There’s a good argument that the markets have been already positioning for a Trump’s victory which is expected to strengthen the higher growth and less rate cuts expectations.
As previously mentioned, this is the trend for now and it’s generally a bad idea to fight such trends without a strong catalyst. The US Dollar will likely remain supported unless Harris wins the US elections and we get a correction in Treasury yields.
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 and today’s underlying inflation figures remaining high. Although the data didn’t change much in terms of interest rate expectations, it supports the RBA’s hawkish stance.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that AUDUSD broke through the 0.6622 level and extended the drop into new lows. From a risk management perspective, the sellers will have a better risk to reward setup around the 0.6622 level to position for further downside. The buyers, on the other hand, will want to see the price breaking higher to start targeting the 0.68 handle.
AUDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a downward trendline defining the current bearish momentum. The sellers will likely keep on leaning on it to position for new lows, while the buyers will want to see the price breaking higher to pile in for a rally into new highs.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much more we can add as the sellers will look to lean on the trendline, while the buyers will want to see the price breaking higher. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the US ADP and the US GDP. Tomorrow, we have the US PCE, the US Jobless Claims and the US Employment Cost Index. Finally, on Friday, we conclude the week with the US NFP and the US ISM Manufacturing PMI.
