Key Points: -
· The AUD/USD pair is currently consolidating its significant gains from recent weeks, reaching a one-month high on Friday.
· However, concerns about the global economic slowdown and moderate strength in the USD are limiting the pair's upward momentum.
· Nevertheless, the Reserve Bank of Australia's (RBA) hawkish outlook continues to support the AUD/USD pair, acting as a favorable factor ahead of the data and event risks scheduled for this week.
Today's Scenario: -
The AUD/USD pair is currently in a bullish consolidation phase at the beginning of the week, trading within a narrow range just below the mid-0.6700s, which represents a one-month high reached on Friday. However, despite the positive momentum, bulls are waiting for the pair to sustain strength above the 100-day Simple Moving Average (SMA) before entering new positions and anticipating further upward movement.
The recent surprise 25 basis points rate hike by the Reserve Bank of Australia (RBA), along with a more hawkish policy statement, continues to support the Australian Dollar (AUD). RBA Governor Lowe defended the rate increase, emphasizing the need to curb inflation by potentially raising interest rates further. This supportive stance acts as a tailwind for the AUD/USD pair. Nevertheless, several factors are currently holding back bulls from taking aggressive positions, which is capping the pair's upside potential for the time being.
Concerns about a global economic downturn, particularly in China, contribute to the strength of the safe-haven US Dollar (USD) and limit gains for the Australian Dollar, which is often seen as a proxy for China. However, further upward movement for the USD is expected to be limited due to uncertainty surrounding the Federal Reserve's next policy decision. Recent dovish comments from Fed officials have reinforced expectations of a pause in the central bank's tightening cycle. Although the markets still price in the possibility of another 25 basis points rate hike in July.
As a result, all eyes are on the highly-anticipated two-day FOMC monetary policy meeting scheduled for Wednesday. Investors will closely analyze the outcome of the meeting for insights into the Fed's near-term policy outlook, which will heavily influence the dynamics of the USD and determine the next direction for the AUD/USD pair. Additionally, the release of US consumer inflation figures on Tuesday is expected to introduce volatility to the markets, creating short-term trading opportunities for the major currency pair.
Diagram of AUD/USD: -
Economic Events: -
Date Event Impact Currency
4:15 (New Zealand) Electronic Retail Card Spending YoY Low NZD
4:15 (New Zealand) Electronic Retail Card Spending MoM Low NZD
5:20 (Japan) PPI YoY Low JPY
5:20 (Japan) PPI MoM Low JPY
5:31 (Ireland) Construction PMI Low EUR
10:30 (Finland) Current Account Low EUR
11:30 (Japan) Machine Tool Orders YoY Low JPY
12:30 (Slovakia) Construction Output YoY Low EUR
13:30 (China) Total Social Financing Low CNY
13:30 (China) New Yuan Loans Low CNY
13:30 (China) M2 Money Supply YoY Low CNY
13:30 (China) Outstanding Loan Growth YoY Low CNY
13:30 (Switzerland) Myfxbook USDCHF Sentiment Medium CHF
13:30 (Australia) Myfxbook AUDUSD Sentiment Medium AUD
13:30 (Japan) Myfxbook USDJPY Sentiment Medium JPY
13:30 (European Union) Myfxbook EURUSD Sentiment Medium EUR
13:30 (United Kingdom) Myfxbook GBPUSD Sentiment Medium GBP
13:30 (Canada) Myfxbook USDCAD Sentiment Medium CAD
13:30 (New Zealand) Myfxbook NZDUSD Sentiment Medium NZD
15:15 (European Union) EU Bond Auction Low EUR
15:15 (European Union) 15-Year Bond Auction Low EUR
18:30 (Ecuador) Balance of Trade Low USD
18:30 (France) 3-Month BTF Auction Low EUR
18:30 (France) 12-Month BTF Auction Low EUR
18:30 (France) 6-Month BTF Auction Low EUR
20:30 (Kosovo) Inflation Rate YoY Low EUR
20:30 (United States) Consumer Inflation Expectations Low USD
21:00 (United States) 6-Month Bill Auction Low USD
21:00 (United States) 3-Year Note Auction Low USD
22:30 (United States) 3-Month Bill Auction Low USD
22:30 (United States) 10-Year Note Auction Low USD
23:30 (United States) Monthly Budget Statement Medium USD
Buy Scenario: -
The AUD/USD pair is experiencing its third consecutive day of gains and has reached a new one-month high during the early European session on Monday. It is currently trading around the 0.6760-0.6765 region, up more than 0.25% for the day. The pair has confirmed a bullish breakout by crossing above the 100-day Simple Moving Average (SMA), which is a significant technical signal.
The Australian Dollar (AUD) is benefiting from the Reserve Bank of Australia's (RBA) unexpected 25 basis points rate hike last week and a more hawkish policy statement. Additionally, the positive sentiment in equity markets is weighing on the safe-haven US Dollar (USD) and supporting the risk-sensitive Aussie. However, a slight increase in US Treasury bond yields may limit USD losses and restrain the AUD/USD pair.
Concerns about a global economic slowdown, particularly in China, could also limit gains for the AUD and prevent significant declines in the USD. Traders may exercise caution and wait for the release of crucial US consumer inflation data on Tuesday before making aggressive moves. The market will closely watch the highly-anticipated FOMC decision on Wednesday, which could provide further direction for the AUD/USD pair.
Given the current fundamental backdrop, it would be prudent to wait for sustained strength above the 0.6800 level before considering further upward moves. If this level is surpassed, the pair may gain momentum and target the next resistance zone around 0.6865-0.6870, followed by the psychological level of 0.6900. Bulls may eventually aim to reclaim the 0.7000 level, with an intermediate hurdle around 0.6970-0.6975. Till we do not advise to buy AUD/USD.
Sell Scenario: -
On the downside, the immediate support is around the 0.6735 area, which coincides with the 100-day SMA. If this support is breached, the pair could test the 0.6700 level, followed by the crucial 200-day SMA around 0.6680. Failure to defend these support levels may trigger technical selling and leave the AUD/USD pair vulnerable. In such a scenario, the pair could decline further towards the 0.6645 support and potentially retest the round-figure mark of 0.6600. Till we do not advise to sell AUD/USD.
Support and Resistance Level: -
S1 0.6706 - R1 0.6764
S2 0.6671 - R2 0.6786
S3 0.6649 - R3 0.6822