Fundamental Overview
The USD last week saw a quick dip across the board following the soft US CPI report as the market priced back in two rate cuts by the end of the year. The moves were reversed soon after though as we got a bit more hawkish than expected FOMC decision where the dot plot showed that the Fed expected just one cut for this year despite the soft US CPI report.
Later on, Fed Chair Powell backpedalled on the projections making them a bit less worrying as the central bank remains very data dependent. The US Dollar eventually got supported in the last part of the last week as the risk sentiment turned more cautious.
The AUD, on the other hand, got pressured mainly because of the risk-off sentiment and the US Dollar strength. This week, the RBA left the Cash Rate unchanged and kept a slightly hawkish stance. The central bank decision coupled with a better risk sentiment gave the Aussie a boost.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that AUDUSD bounced from the key support zone around the 0.66 handle and extended the rally following the slightly hawkish RBA decision and the good US Retail Sales report.
The natural target for the buyers is the resistance around the 0.6712 level. That’s where we can expect the sellers to step in with a defined risk above the resistance to position for a drop back into the bottom of the range.
AUDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the rangebound price action between the 0.67 resistance and the 0.66 support. These will be the key levels that the market will likely need to break to start a more sustained trend. For now, will could keep bouncing around until we get a clear breakout.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price bottomed around the support and once it broke above the trendline the bearish momentum started to wane. Eventually, the break above the 0.6620 level gave the buyers enough conviction to pile in more aggressively and extend the rally towards the top of the range.
If we get a pullback, the buyers might lean on the trendline and the 50% Fibonacci retracement level around the 0.6640 level. The sellers, on the other hand, will have a better risk to reward setup around the 0.67 resistance, but if the price breaks below the trendline, the bearish momentum might increase and see the sellers piling in to target a breakout to the downside. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we have the US Housing Starts, Building Permits and the US Jobless Claims figures. On Friday, we conclude the week with the Australian and the US PMIs.