FUNDAMENTAL OVERVIEW
USD:
The US dollar weakened across the board on Friday after the US Supreme Court struck down Trump’s reciprocal tariffs. The resulting policy uncertainty is what is likely to have weighed on the greenback, even though nothing has actually changed.
Trump has already imposed new tariffs under a different law and USTR Greer has stated that the tariff deals remain in place and they will be honoured. Moreover, the new levies actually reduce the effective average tariff rate.
The dollar recouped most of the losses yesterday, but it might remain rangebound for now as traders await new catalysts and further developments. The real risks remain a potential US-Iran military escalation which could boost the greenback on severe risk-off mood or a hawkish repricing on stronger US data which would have a positive effect on the USD. Fed’s Waller placed a great deal on next week’s NFP report.
AUD:
On the AUD side, the bullish momentum from the hawkish repricing of last month seems to have waned now. The currency remains supported on a hawkish central bank and strong data, but we will likely need stronger reasons to price in more rate hikes at this point.
Tomorrow, we get the monthly Australian CPI report. We will likely need very hot data to give the AUD another boost as traders would bring forward expectations for the next rate hike. Last week, the currency failed to sustain a rally on another strong jobs report which might have been a signal that we reached the peak in the hawkish repricing, and a major pullback could be in the cards. A soft CPI report could trigger such a correction.
As a reminder, the RBA hiked the Cash Rate by 25 bps at the last meeting bringing it back to 3.85%. The central bank delivered a hawkish surprise as it signalled two more rate hikes by year-end compared to just one expected by the market at the time.
AUDUSD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that AUDUSD broke below the first upward trendline which could be a signal of further downside to follow. From a risk management perspective, the buyers will have a better risk to reward setup around the next trendline to position for a rally into new highs. The sellers, on the other hand, will look for a break lower to extend the drop into the major trendline around the 0.67 handle.
AUDUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that the price has been consolidating between the 0.7090 resistance and the 0.7027 level. The market participants will likely continue to play the range until we get a breakout on either side.
AUDUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much else we can add here as the sellers will likely pile in around the resistance and on a break below the support, while the buyers will step in around the support and increase the bullish bets on a break above the resistance. The red lines define average daily range for today.
UPCOMING CATALYSTS
Today we have the weekly US ADP jobs data. Tomorrow, we have the monthly Australian CPI report. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US PPI report. Watch out for US-Iran headlines.
