Fundamental
Overview
The main culprit for the US
Dollar strength lately has been the rally in long term Treasury yields. The
yield curve has been bear-flattening which is what you would expect with higher
growth and potentially higher inflation expectations.
There’s a good argument
that the markets have been already positioning for a Trump’s victory which is
expected to strengthen the higher growth and less rate cuts expectations.
As previously mentioned,
this is the trend for now and it’s generally a bad idea to fight such trends
without a strong catalyst. The US Dollar will likely remain supported unless
Harris wins the US elections and we get a correction in Treasury yields.
On the AUD side, the latest
data has been pretty strong with the Australian labour market report last week beating expectations by a
big margin and today’s underlying
inflation figures remaining high. Although the data didn’t change much in
terms of interest rate expectations, it supports the RBA’s hawkish stance.
AUDUSD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that AUDUSD broke through the 0.6622 level and extended the drop into new
lows. From a risk management perspective, the sellers will have a better risk
to reward setup around the 0.6622 level to position for further downside. The
buyers, on the other hand, will want to see the price breaking higher to start
targeting the 0.68 handle.
AUDUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a downward trendline defining the current bearish
momentum. The sellers will likely keep on leaning on it to position for new
lows, while the buyers will want to see the price breaking higher to pile in
for a rally into new highs.
AUDUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s
not much more we can add as the sellers will look to lean on the trendline,
while the buyers will want to see the price breaking higher. The red lines
define the average daily range for today.
Upcoming
Catalysts
Today we get the US ADP and the US GDP. Tomorrow, we have the US PCE, the US
Jobless Claims and the US Employment Cost Index. Finally, on Friday, we
conclude the week with the US NFP and the US ISM Manufacturing PMI.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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