AUDUSD Technical Analysis – The buck stays on the backfoot

Fundamental
Overview

The USD extended the losses
yesterday following dovish comments from Fed’s Kashkari as he basically got in
line with other members for a rate cut in September. This change of heart was
triggered by the softer than expected NFP report last Friday.

Overall, the data wasn’t as
bad as one might think by just looking at the reaction but given that we were
positioned for a strong report and the pricing got more hawkish after the Fed’s
decision, the weaker data was enough to trigger a quick repricing.

In fact, the market is now
pricing 60 bps of easing by year-end compared to just 35 bps before the NFP
release. It’s highly likely that more benign data will see Fed Chair Powell
opening the door for a cut in September at the Jackson Hole Symposium.

Nonetheless, the ISM Services PMI this week showed a new high
in the prices index and the US jobless claims today could trigger a rethink on
the actual softness of the labour market in case we get strong data. Of course,
weak figures will just solidify market’s expectations and weigh on the
greenback further.

On the AUD side, the
inflation data eased further in the quarterly report which will give the RBA
more conviction to cut at the upcoming meeting. That was already expected
though as the market has been pricing at least two rate cuts by year-end for
months. Further weakness in the labour market data, could give the market reasons
to price in more aggressive cuts.

AUDUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that AUDUSD has been rallying steadily since the soft NFP report. There’s
not much we can glean from this timeframe as the price is now trading in the
middle of the two key levels: the top trendline
and the support
zone around the 0.6350 level. We need to zoom in to see some more details.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we broke above the minor support zone around the 0.6485 level and
extended the rally as the buyers increased the bullish bets. We have now a
minor upward trendline defining the bullish momentum. If the price pulls back,
we can expect the buyers to lean on the trendline with a defined risk below it
to extend the rally into the 0.66 handle next. The sellers, on the other hand, will
look for a break lower to pile in for a drop back into the 0.6350 support.

AUDUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much else we can add here but the price is now trading near the upper bound
of the average daily range for today. We can generally see
pullbacks from such levels and in any case, the buyers would be better off
stepping in around the trendline from a risk/reward perspective.

Upcoming Catalysts

Today we get the latest US Jobless Claims
figures.