Fundamental Overview
The USD strengthened a bit on Friday following some positive Trump’s comments on China as Treasury yields bounced and erased the Thursday’s losses. Overall, the US dollar performance has been mixed as markets have been driven by quick changes in risk sentiment since Trump’s tariffs threat.
On the domestic side, the US government shutdown continues to delay many key US economic reports. The dollar “repricing trade” needs strong US data to keep going, especially on the labour market side, so any hiccup on that front is weighing on the greenback.
The BLS will release the US CPI report on Friday despite the shutdown, so that’s going to be a key risk event. That will need to be seen in the context of US-China relations and any negative shock by that time though. If things go south, then the CPI will not matter much as growth fears will trump everything else.
On the AUD side, the commodity currency sold off aggressively across the board following Trump’s tariff threat on China. Given the close link between China and Australia on the trade side, the market increased the dovish bets on the RBA given the new risk. Eventually, the AUD bounced back following more soothing comments from Trump and other US officials. Nevertheless, the currency has been mostly rangebound since the tariff threat and it looks like the market is just waiting for a clear breakthrough on that front.
On the monetary policy side, the RBA kept everything unchanged at the last meeting with RBA Governor Bullock not offering much in terms of forward guidance other than the usual data dependency and meeting by meeting approach to interest rate decisions.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that AUDUSD is consolidating between the 0.6520 resistance and the 0.6440 support. The market participants will likely continue to play the range until we get a breakout on either side.
AUDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the recent rangebound price action caused by the new US-China trade tensions. The sellers will likely continue to lean on the resistance to keep targeting a break below the support, while the buyers will either wait for a pullback into the support or a break above the resistance to pile in for a rally into the major trendline.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as we remain stuck in this range for the time being. The red lines define the average daily range for today.
Upcoming Catalysts
The focus remains on the US-China developments but on Friday we will also get the US CPI report and the US flash PMIs.
