AUD/USD consolidates at a major trendline as traders await fresh catalysts
FUNDAMENTAL
OVERVIEW
USD:
The US dollar has been supported following the hawkish Fed dot plot last
week as the central bank’s tightening bias led to a hawkish repricing in
interest rate expectations.
As a reminder, the Fed delivered a hawkish surprise by projecting a rate
hike this year (the consensus was for no cuts or hikes). There are now 32 bps
of tightening priced in by year-end. There’s a 29% chance of a hike in July and
60% probability of a move in September.
There’s been a slightly dovish repricing in the last couple of days. One of
the reasons could be the huge selloff in oil prices which have now reached
pre-war levels. The other reason is that the hawkish repricing might have
reached a near-term peak and for more we will likely need upside surprises in
the NFP and CPI reports.
Although the greenback should remain supported into the data, we might
start to see some consolidation or even pullbacks if don’t get any meaningful
catalyst before the key US data.
AUD:
On the AUD side, the RBA
recently softened its tone following the rate hike that pushed the cash rate to
4.35% with one dissenter voting for keeping rates unchanged. The meeting
minutes and recent remarks from policymakers indicate that the central bank is
leaning toward a pause as they gauge the economic impact of previous hikes even
though they maintain a tightening bias.
The recent data showed an
easing in headline inflation, but the core measure ticked higher still. The
employment report was a bit better than the prior month with the unemployment
rate ticking lower. The recent PMIs showed business activity and future sentiment
improving. All in all, the data will likely keep the RBA in a tightening bias
but it’s not urging for further rate hikes. The market is pricing just a 31%
chance of another rate hike by year-end.
AUDUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that AUDUSD finally reached the major
upward trendline. This is where we can expect the buyers to step in with a
defined risk below the trendline to position for a pullback into the downward trendline.
The sellers, on the other hand, will want to see the price breaking lower to keep
pushing into the 0.6835 level next.
AUDUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have
a minor downward trendline defining the bearish momentum. The sellers will likely
continue to lean on the trendline with a defined risk above it to keep pushing
into new lows. The buyers, on the other hand, will look for a break higher to
increase the bullish bets into the next trendline around the 0.70 handle.
AUDUSD TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here but we can see there’s a strong resistance zone around
the 0.6925 level. That’s where we can expect the sellers to step in with a
defined risk above the trendline to keep pushing into new lows, while the buyers
will need the price to break higher to potentially extend the pullback into the
next trendline. The red lines define average daily range for today.
UPCOMING CATALYSTS
Today, we conclude the
week with the final University of Michigan consumer sentiment survey.
This article was written by Giuseppe Dellamotta at investinglive.com.