Basic overview
The US dollar was sold off across the board yesterday after the weak US CPI report. This data has prompted the market to re-price the discounts twice this year. Later in the day, we got a tougher than expected decision from the FOMC as the chart showed that the Fed sees only one cut for the year despite a weak US CPI report.
This gave the dollar a boost, but Fed Chairman Powell backed off the forecast making it a bit less worrisome as the central bank still relies heavily on data. So, overall, the US dollar may remain under pressure as risk sentiment is expected to improve thanks to the weak US CPI.
On the other hand, the Australian dollar was supported by a slightly more hawkish Reserve Bank of Australia and positive risk sentiment due to the recovery in global growth. Furthermore, the recovery of the Chinese economy is generally good news for the Australian dollar, as well as it being Australia's largest trading partner.
Today, we also got a good report on the Australian labor market which doesn't change anything for the RBA but should keep the currency supported should we return to risk-on.
Technical Analysis of AUDUSD – Daily Time Frame
AUD/USD daily
On the daily chart, we can see that AUDUSD rose to the top of the range around the 0.67 level after the release of the US CPI. Sellers intervene with a defined risk above the resistance level to drop back to the bottom of the range. Buyers will want to see the price break the resistance level to gain more conviction and start targeting the 0.6870 level.
Technical Analysis of AUD/USD – 4-Hour Time Frame
Australian dollar against the dollar 4 hours
On the 4-hour chart, we can see more clearly the price action in a limited range between resistance 0.67 and support 0.66. The price is currently sitting right in the middle of the range, so from a risk management perspective there is not much to do here although if momentum changes on the lower time frame, we could see bullish sentiment gaining strength.
Technical analysis of the AUD/USD pair – 1 hour time frame
AUD/USD 1 hour
On the one-hour chart, we can more clearly see the rise after the release of the US CPI and the decline due to the tighter-than-expected FOMC decision. If the price breaks above the blue line around 0.6667, the bullish momentum is likely to increase and we could see a rise back to the top of the range. The red lines mark the average daily range for the day.
Upcoming stimuli
Today we have the US Producer Price Index and the latest US unemployment claims numbers. Tomorrow, we wrap up the week with the results of the University of Michigan Consumer Survey.
