Tag: AUDUSD Technical Analysis

Fundamental
Overview

The USD is losing ground
against the major currencies as the market continues to price in more easing by
the end of the year. The market is now expecting three rate cuts by the end of
the year which is in stark contrast to just one seen a couple of weeks ago.

The US data recently
started to miss expectations by a big margin and the market reacted by
adjusting its growth expectations. The Trump’s tariffs policy is also weighing
on growth expectations increasing the likelihood of faster Fed easing down the
road.

One constraint the Fed
might have could come from higher inflation expectations. In case we get a
slowdown, the Fed might not be fast enough in cutting rates amid inflation
remaining above target and uncomfortably high long-term inflation expectations.
This is something to keep in mind in light of the next NFP and CPI reports.

On the AUD side, the RBA cut interest rates by 25 bps as expected recently bringing
the Cash Rate to 4.10% but it was accompanied by a more hawkish than expected
guidance. After the rate decision, we got a strong Australian Employment report and last week the monthly Trimmed-Mean CPI ticked higher to 2.8% remaining
near the upper bound of the 2-3% target range. Nonetheless, the AUD came under
pressure amid the Trump’s tariffs threats and general risk-off flows.

AUDUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can
see that AUDUSD fell all the way back to the yearly lows. This is where we can
expect the buyers to step in to position for a rally back into the highs. The
sellers, on the other hand, will want to see the price breaking below the
0.6170 level to increase the bearish bets into new lows.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a downward trendline defining the bearish momentum. The
sellers will likely lean on the trendline to keep pushing into new lows, while
the buyers will look for a break above the trendline and the 0.6254 level to
regain conviction and position for a rally back into the highs.

AUDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much we can add here as the sellers will look for a rejection from the
trendline, while the buyers will look for a break above it. The red lines
define the average daily range for today.

Upcoming Catalysts

Today the market participants will be on
the lookout for tariffs headlines as they go into effect for Canada, Mexico and
China. Tomorrow, we have the US ADP and the US ISM Services PMI. On Thursday,
we get the latest US Jobless Claims figures. On Friday, we conclude the week
with the US NFP report.

Fundamental
Overview

Yesterday, the US PPI report came in higher than expected but the
focus was on the details that feed into the Core PCE index, which is what the
Fed focuses on. Those details were all very soft and helped to bring the early
estimates down to more benign levels. In fact, the Core PCE Y/Y is now
projected to fall to 2.6% vs. 2.8% prior. That’s good news for the Fed.

The US Dollar fell across
the board as a result and eventually the bearish momentum increased
substantially in the evening as the Trump’s tariffs saga came to an end. In
fact, the US President announced his reciprocal tariffs that could go into effect in April
but the overall tone of it wasn’t aggressive and sounded a lot like the start
of a negotiating process to bring tariffs to a fair level for everyone.

On the AUD side, it’s been
all about the US Dollar softness and with the markets now less concerned about
tariffs, the other major currencies got the green light to appreciate against
the greenback.

On the data side, the Australian Q4 CPI report recently missed expectations
across the board with the underlying inflation figures easing further and now
comfortably in the RBA’s target range on a 6-month annualised basis.

As a reminder, the RBA softened
further its stance
at the last policy decision as it nears the first rate cut. The market is now seeing
an 86% chance of a 25 bps cut in February with a total of 75 bps of easing
expected by year end.

AUDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that AUDUSD is testing the key resistance zone around the 0.6330 level. This
is where we can expect the sellers to step in with a defined risk above the
resistance to position for a drop back into the 0.6170 level. The buyers, on
the other hand, will want to see the price breaking higher to increase the
bullish bets into the 0.65 handle next.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have an upward trendline
defining the bullish momentum. If we get a pullback into it, we can expect the
buyers to lean on the trendline with a defined risk below it to position for
the break above the resistance. The sellers, on the other hand, will want to see
the price breaking lower to increase the bearish bets into the 0.6170 level next.

AUDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much we can add here as the sellers will pile in around these levels, while
the buyers will look for a breakout to extend the rally into new highs. The red
lines define the average daily range for today.

Upcoming Catalysts

Today we conclude the week with the US
Retail Sales.