Basic overview
The US dollar got a little support this week as Fed Chair Powell reiterated that 50 basis points easing by the end of the year remains the base case. As a result, the probability that the Fed will cut interest rates by 50 basis points in November fell from 51% to 40%.
On the data side, yesterday’s ISM Manufacturing PMI was released slightly below expectations. On the bright side, the new orders index improved slightly which could be an early sign of better times ahead. In contrast, the employment component declined more in the downturn but remained above the cycle low.
On the Australian dollar side, the Reserve Bank of Australia kept interest rates unchanged as expected at the last meeting, and although Governor Bullock maintained his hawkish stance, the tone was softened slightly. The market expects the first reduction to come in February 2025.
The latest monthly Australian CPI came in below expectations and although it did not change much in market prices, it still represented an improvement. The Australian dollar should also be supported in the bigger picture as global growth picks up with recent Chinese easing measures.
Technical Analysis of AUDUSD – Daily Time Frame
AUD/USD daily
On the daily chart, we can see that AUDUSD is consolidating above the key level of 0.6870. This is where we can expect buyers with specific risks to accumulate below the level in preparation for a rally to new highs. On the other hand, sellers will want to see the price break below the key level to put it in a position to pull back to the 0.68 handle.
Technical Analysis of AUD/USD – 4-Hour Time Frame
Australian dollar against the dollar 4 hours
On the 4-hour chart, we can see that we have a strong support area around the 0.68 handle where we can find the intersection of the trend line and the 38.2% Fibonacci retracement level. If we get a pullback to the support level, buyers will likely step in with specific risks below the trend line to position themselves for a rally to new highs. On the other hand, sellers will want to see the price fall to increase bearish bets to the 0.66 handle next.
Technical Analysis of AUD/USD – 1 Hour Time Frame
AUD/USD 1 hour
On the 1-hour chart, we can see that we have a simple downtrend line outlining the current pullback. We can expect sellers to continue to rely on it to identify further downside, while buyers will look for a breakout higher to target new highs. The red lines mark the average daily range for the day.
Upcoming stimuli
Today we get the US ADP report. Tomorrow we’ll have the latest US unemployment claims numbers and the US Services Purchasing Managers’ Index (ISM). Finally, on Friday, we conclude the week with the US NFP report.
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