AUD/USD ANALYSIS & TALKING POINTS
- USD on offer as Fed rate pause remains market consensus.
- All eyes shift to US CPI tomorrow.
- Still room for AUD to appreciate against the greenback.
AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP
The Australian dollar has started the week where it left off with the pro-growth currency in the green in early trade on Monday morning. AUD/USD is roughly 0.16% higher for the day already, on the back of a marginally weaker US dollar while markets have extended the theme of a Fed interest rate pause on Wednesday. That being said, US CPI tomorrow could really disrupt the current status quo should inflation readings come in higher than expected. This may not change the rate pause but could keep the door open for yet another rate hike down the line. These two economic releases are driving the AUD/USD currency pair today in relation to the declining differential between US and Australian rates after the Reserve Bank of Australia (RBA) unexpectedly hiked last week.
At present money markets are pricing in a 73% chance of a rate pause with little signs of worry from tomorrow’s CPI print. While no heavy hitting data is scheduled for today, the rest of the week is stacked with high impact events (see economic calendar below). From an Australian perspective, consumer confidence which has fallen sharply and labor data will be in focus. Another strong jobs read may keep the hawkish narrative alive for the RBA going forward.
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AUD/USD ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX economic calendar
TECHNICAL ANALYSIS
AUD/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Daily AUD/USD price action is now trading above both the 50-day MA (yellow) and 200-day MA (blue) favoring further upside. The Relative Strength Index (RSI) still has room before it reaches overbought territory. Falling inflation and a Fed rate pause could [ush the pair back towards the 0.6800 psychological level once more.
From a bearish perspective, a inflation beat could likely see another breach below 0.6700 and beyond.
Key resistance levels:
- 0.6800
- 0.6772
Key support levels:
- 0.6700/200-day MA
- 50-day MA
- 0.6620
IG CLIENT SENTIMENT DATA: BULLISH
IGCS shows retail traders are currently neither LONG or SHORT on AUD/USD, with 50% of traders currently holding long and short positions. At DailyFX we typically take a contrarian view to crowd sentiment resulting but due to recent changes in long and short positioning, we arrive at a short-term upside disposition.
Contact and followWarrenon Twitter:@WVenketas
