Fundamental
Overview
The USD rallied across the
board last week after a slate of strong US data. The focus was mainly on Jobless Claims which beat expectations by a big
margin with Initial Claims falling to the lowest level since July and
Continuing Claims improving further. This triggered a hawkish repricing in
interest rates expectations since the Fed started cutting rates solely due to
weaker labour market data.
This means that if we
continue to get stronger labour market data, the Fed could start turning more
hawkish again and we might not get another cut in October, or more probably in
December. Therefore, there’s still plenty of room for the US dollar to appreciate
in case of strong data as the market’s pricing remains too dovish. The Fed
projected 75 bps of easing by the end of 2026, while the market is still
pricing 104 bps.
The greenback erased all
the gains triggered by last week’s data in the meantime as we are likely
experiencing a pullback after a very strong rally. Other possible reasons
include the government shutdown fears and quarter-end flows.
On the AUD side, the RBA is
expected to keep interest rates steady tomorrow following a benign employment
report, higher than expected monthly inflation data and slightly hawkish RBA’s Bullock remarks. Traders will be focused on
forward guidance and how Governor Bullock frames the balance of risks. At the
moment, the market is pricing just a 60% chance of another rate cut this year.
AUDUSD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that AUDUSD extended the drop from the top trendline with the sellers continuing
to target the 0.6350 support zone. There’s not much else we can glean from
this timeframe, so we need to zoom in to see some more details.
AUDUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a strong resistance zone around the 0.6580 level where we can
find the confluence of the downward trendline and the
old support. This is where we can expect the sellers to step in with a defined
risk above the resistance to position for a drop into the 0.6484 level. The
buyers, on the other hand, will want to see the price breaking higher to extend
the rally into the 0.6628 level next.
AUDUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that the price is breaking below the upward trendline that was defining the
bullish momentum on this timeframe. We can expect the sellers to pile in around
these levels to position for a drop into new lows, while the buyers will likely
wait for a break to the upside to invalidate the bearish setup and target new
highs. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we have the RBA policy announcement, the US Job
Openings data and the US Consumer Confidence report. On Wednesday, we have the
US ADP and the US ISM Manufacturing PMI. On Thursday, we get the latest US
Jobless Claims figures. On Friday, we conclude the week with the US NFP report
and the US ISM Services PMI. Keep also an eye on Fed speakers.
This article was written by Giuseppe Dellamotta at investinglive.com.