This week the US inflation data came out arguably on the more softer side than feared. Both the Core CPI and Core PPI missed expectations but the US dollar found bids nonetheless. I’m not sure what’s the driver here because interest rates expectations haven’t changed much and the data wasn’t bad at all.
My guess it’s that it has more to do with positioning rather than fundamentals. The “short US dollar” trade has recently become the most crowded one and
in such instances, it doesn’t take much to see strong unwinding. Maybe, the market is expecting even higher inflation figures ahead. We’ll see how that evolves.
On the AUD side, today the Australian employment data was much weaker than expected and solidified the expectations for an RBA rate cut at the upcoming meeting. This weighed on the Australian dollar as the currency dropped across the board. The market might use the same playbook that we’ve seen for the RBNZ when the central bank moved slowly in cutting rates and the market kept on expecting more aggressive cuts eventually.
AUDUSD daily
On the daily chart, we can see that the price rejected once again the top trendline that’s been defining the broadening wedge and extended the move to the downside. The target for the sellers should be the key support zone around the 0.6350 level. If the price gets there, we can expect the buyers to step in with a defined risk below the support to position for a rally into the 0.69 handle next, while the sellers will look for a break lower to extend the drop into the 0.60 handle.
AUDUSD 1 hour
On the 1 hour chart, we can see that we have a minor resistance now around the 0.6485 level. If we get a retest, we can expect the sellers to step in with a defined risk above the resistance to position for further downside, while the buyers will look for a break higher to pile in for a rally into the top trendline again.
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