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Fundamental
Overview
The US Dollar fell across
the board in the final part of last week for two main reasons. 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% in the prior month. That’s good news for the
Fed.
Eventually, the bearish
momentum increased substantially 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, the RBA is
expected to cut interest rates by 25 bps tomorrow bringing the Cash Rate to
4.10%. As a reminder, the RBA softened
further its stance
at the last policy decision as it prepared for the first rate cut. The market
is pricing a total of 75 bps of easing by year end.
These expectations have
been shaped by the recent inflation data. In fact, the Australian Q4
CPI 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.
Given the unwinding of long
positions in the US Dollar, a spike lower in AUDUSD on an RBA’s cut will likely
be faded.
AUDUSD
Technical Analysis – Daily Timeframe
AUDUSD Daily
On the daily chart, we can
see that AUDUSD is trading above the key resistance zone around the 0.6330 level. The
buyers will likely continue to pile in around these levels to position for an
extension into the 0.65 handle. The sellers, on the other hand, will want to
see the price falling back below the resistance to position for a drop into the
lows.
AUDUSD Technical
Analysis – 4 hour Timeframe
AUDUSD 4 hour
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 triggered by the RBA’s cut, we can expect the buyers
to lean on the trendline with a defined risk below it to position for a rally
into the 0.65 handle. The sellers, on the other hand, will want to see the
price breaking lower to increase the bearish bets into the lows.
AUDUSD Technical
Analysis – 1 hour Timeframe
AUDUSD 1 hour
On the 1 hour chart, there’s
not much we can add here as the buyers will continues to pile in around these
levels, while the sellers will look for a break below the broken resistance to
position for a drop back into the lows. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we have the RBA rate decision. On
Thursday, we get the Australian Employment report and the latest US Jobless
Claims figures. On Friday we conclude with the Australian and the US Flash
PMIs.