FUNDAMENTAL OVERVIEW
USD:
The US dollar is now trading higher against most major currencies after the hot US NFP report and the slightly soft US CPI data of last week. The market is still pricing 58 bps of easing by year-end but the crowded bearish positioning on the US dollar requires strong reasons for the greenback to keep falling.
There’s no such reason right now, on the contrary, we are seeing the US data surprising to the upside. Fed speakers are also sounding like the bar for further cuts was set high and they would need very clear improvement on the inflation side to consider a rate cut.
The US-Iran tensions could also be a positive for the US dollar in case a war breaks out. In fact, given the severity of the risk aversion that would be triggered by such an event, traders would likely be more inclined to buy the greenback.
Today, we get the US Jobless Claims data but unless we see meaningful deviations, the market is unlikely to move much on it. Tomorrow, we get the Flash US PMIs and the US Q4 GDP. The greenback might get another boost from strong data, especially on the PMIs front. We have also the potential US Supreme Court decision on Trump’s tariffs tomorrow. If the Court were to rule against the tariffs, we could see the US dollar weakening on positive global growth expectations.
AUD:
On the AUD side, the currency failed to sustain a rally on another strong jobs report. The market pricing has also remained the same with traders seeing 42 bps of tightening by year-end. This might be a signal that we reached the peak in the hawkish repricing, and a major pullback might follow. We will likely need hot CPI data to see more upside for the currency at this point.
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 pulled back to the first upward trendline. This is where we can expect the dip-buyers to step in with a defined risk below the 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 next trendline around the 0.69 handle.
AUDUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that the price is consolidating between the 0.7090 resistance and the trendline. The most recent low at 0.7027 could still act as support and avoid a major breakdown, but if the price falls below it, the sellers should have free room till the 0.69 support.
AUDUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much else we can add here as the buyers will likely step in around the trendline and the 0.7027 low to keep targeting new highs, while the sellers will look for breaks to pile in for a drop into the 0.69 support next. The red lines define average daily range for today.
UPCOMING CATALYSTS
Today we get the latest US Jobless Claims figures. Tomorrow, we conclude the week with the US Q4 GDP, the US PCE price index for December, the US Flash PMIs and a potential US Supreme Court decision on Trump’s tariffs. Watch out for US-Iran headlines as well.
