Fundamental Overview
The USD has been weak almost across the board since the NFP report as the softer than expected data triggered a quick dovish repricing and a change in stance for many Fed members.
The market is pricing 58 bps of easing by year-end compared to just 35 bps before the NFP release. It’s highly likely that more benign data will see Fed Chair Powell opening the door for a cut in September at the Jackson Hole Symposium.
The focus now turned to the US CPI report due tomorrow. The recent Fedspeak suggests that a rate cut in September might be unavoidable, so we might need very hot inflation data to change their mind (and of course a good NFP report in September).
On the AUD side, the inflation data eased further in the quarterly report which will translate in a rate cut tomorrow for the RBA. This is already fully priced in though, so the focus will be on forward guidance. The market is pricing at least two cuts by year-end (including tomorrow’s one) and some chances of a third. Further weakness in the labour market data, could give the market reasons to price in more aggressive cuts.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that AUDUSD has been moving up steadily since the soft NFP report. There’s not much we can glean from this timeframe as the price is now trading in the middle of the two key levels: the top trendline and the support zone around the 0.6350 level. 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 minor upward trendline defining the bullish momentum. The buyers will likely continue to lean on the trendline with a defined risk below it to keep pushing into new highs, while the sellers will look for a break lower to pile in for a bigger pullback into the 0.6485 support.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here but the price is now trading near the minor support zone around the 0.6512 level. A break below this level will likely invalidate the bullish setup and give the sellers room to target the 0.6485 support. The red line define the average daily range for today.
Upcoming Catalysts
Tomorrow we have the RBA rate decision and the US CPI. On Wednesday, we get the Australian Wage Price index for Q2. On Thursday, we get the Australian employment report, the US PPI and the US Jobless Claims figures. On Friday, we conclude the week with the US Retail Sales and the University of Michigan Consumer Sentiment report. Focus also on Fedspeak, especially after the US CPI data.
