Fundamental
Overview
The USD sold off across the
board on Friday as Fed Chair Powell tilted more dovish by saying that “with
policy in restrictive territory, the baseline outlook and the shifting balance
of risks may warrant adjusting our policy stance.”
That saw traders firming up
expectations for a rate cut in September which now stands around 82%
probability with a total of 54 bps of easing by year-end. Overall, it’s not the
repricing in interest rates expectations that weighed on the greenback but
hedges being unwound.
Now, the focus turns to the
US NFP report next week which is going to be crucial and will influence greatly
interest rates expectations. Strong data might take the probability for a
September cut towards a 50/50 chance but will certainly see a more hawkish
repricing further down the curve. Soft data, on the other hand, will likely see
traders increasing the dovish bets with a third cut by year-end being priced
in.
On the AUD side, the RBA
cut interest rates by 25 bps as widely expected at the last meeting but didn’t
offer much in terms of forward guidance, although their focus switched more
towards the labour market. The latest employment report missed by a little
margin on the headline number but overall the data was good. The market is
seeing a 63% probability of no change at the next meeting and a total of 36 bps
of easing by year-end.
AUDUSD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that AUDUSD has been trading right in the middle of the two key levels
defined by the top trendline and the support zone around the 0.6350 level. There’s not much
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 the price is now consolidating around a key zone in the 0.6485 area.
This is going to act kind of like a barometer with the price staying above it
being more bullish and below it being more bearish. The buyers therefore will
wait for the price to break higher to pile in for a rally into new highs, while
the sellers will keep on stepping in below the zone to target a drop back into
the 0.6418 low.
AUDUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see more clearly the consolidation defined by the grey box. There’s not much we
can add here as a breakout on either side should lead to more sustained trends.
The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US Consumer Confidence
report. Tomorrow, we get the Australian Monthly CPI data. On Thursday, we get
the latest US Jobless Claims figures. On Friday, we conclude the week with the
US PCE price index.
This article was written by Giuseppe Dellamotta at investinglive.com.