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
AUDUSD Daily
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
AUDUSD 4 hour
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
AUDUSD 1 hour
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.
