FUNDAMENTAL OVERVIEW
USD:
The US Dollar rebounded in the final part of last week with analysts pointing to the nomination of Kevin Warsh as the next Fed chair as the main catalyst. The reality is that the strong selloff in the greenback wasn’t backed by fundamentals in the first place. The greenback didn’t have strong reasons to appreciate, but there wasn’t a reason for a strong selloff either.
The US data continues to improve, especially on the labour market side as the US Jobless Claims suggest a re-acceleration in activity. Yesterday’s US ISM Manufacturing PMI beat expectations by a big margin with the new orders index jumping to the best levels since 2022. February might be the month when the US Dollar comes back with a vengeance if we keep getting strong data.
The NFP report is certainly the main highlight although it got delayed due to the partial shutdown. Nonetheless, we will get many other top tier data that could give the greenback a boost like the US ADP and the ISM Services PMI.
The market is pricing 48 bps of easing by year-end and those bets will be pared back in case the data strengthens. Conversely, if the data comes out softer than expected, then we could see the US Dollar coming back under pressure, although the momentum shouldn’t be as strong as we’ve seen in January.
AUD:
On the AUD side, the RBA hiked the Cash Rate by 25 bps as widely expected bringing it back to 3.80%. The focus was solely on the forward guidance and especially on the updated forecasts. That’s where we got the hawkish surprise as the central bank signalled two more rate hikes by year end compared to just one that the market was expecting. The Australian Dollar jumped across the board on the hawkish hike.
AUDUSD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that AUDUSD retested the support zone around the 0.69 handle and eventually rallied following the hawkish RBA rate hike. The buyers will target the 0.7150 level and if we get there, we can expect the sellers to step in with a defined risk above the 0.7150 level to position for a drop back into the 0.69 support.
AUDUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly the bounce on the support. If the price comes back to the support, we can expect the buyers to continue to step in to target new highs, while the sellers will look for a break lower to pile in for a drop into the major trendline around the 0.6750 level next.
AUDUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that the price is trading at the upper bound of the average daily range for today. In such instances, we can generally see some consolidation or a pullback before the next move. From a risk management perspective, the buyers will have a better risk to reward setup around the minor upward trendline to keep pushing into new highs, while the sellers will look for a break lower to start targeting a break below the major support.
UPCOMING CATALYSTS
Tomorrow the US ADP and the US ISM Services PMI. On Thursday, we get the US Jobless Claims figures. On Friday, we conclude the week with the University of Michigan Consumer Sentiment data.
