Fundamental
Overview
The USD is weaker across
the board following the soft US PPI report yesterday. The market pricing is now
showing a total of 31 bps of easing by year end compared to 24 bps before the
PPI. The focus remains on the US CPI report today.
A hot report will likely
cause some trouble in the markets with the stock market looking as the most
vulnerable right now.The best outcome would be a soft
report given the overstretched moves in the markets caused by the repricing in
rate cuts expectations.
That would likely reverse
most of the recent trends and trigger a correction in Treasury yields and
therefore in the US Dollar.
On the AUD side, the RBA softened
further its stance
at the last policy decision as it nears the first rate cut. The market is
seeing a 67% chance of a 25 bps cut in February although the first fully priced
in cut is seen in April.
The recent Australian Monthly CPI showed core inflation easing with
the Trimmed Mean CPI Y/Y coming in at 3.2%. This has increased the expectations
for a rate cut already at the February policy meeting. As a reminder, the RBA’s
inflation target band is 2-3%.
AUDUSD
Technical Analysis – Daily Timeframe
AUDUSD Daily
On the daily chart, we can
see that AUDUSD is bouncing from the 2020 lows as the US Dollar weakened
following the tariffs news and the US PPI data. From a risk management
perspective, the sellers will have a better risk to reward setup around the
major trendline to position for further downside.
The buyers, on the other hand, will want to see the price breaking higher to
increase the bullish bets into new highs.
AUDUSD Technical
Analysis – 4 hour Timeframe
AUDUSD 4 hour
On the 4 hour chart, there’s
not much else we can glean from this timeframe, so we need to zoom in to see
some more details.
AUDUSD Technical
Analysis – 1 hour Timeframe
AUDUSD 1 hour
On the 1 hour chart, we can
see that we have an important resistance zone around the 0.62 handle where
the price got rejected from several times in the past days. This is where we
can expect the sellers to step in with a defined risk above the level to
position for a drop into new lows.
The buyers, on the other
hand, will look for a break higher to increase the bullish bets into the major
trendline. The red lines define the average daily range for today although the price can
easily extend beyond those levels given that we have the US CPI report ahead
and it’s a key event.
Upcoming
Catalysts
Today, we have the US CPI report, while tomorrow we get the latest US Jobless
Claims figures.