Published on Jun 14, 2023

Daily Analysis For AUD/USD 14-06-2023

AUD/USD Analysis

Key Points: -

· AUD/USD hovers around its highest level in five weeks, maintaining a four-day upward trend.

· The prospect of the Federal Reserve taking no action due to US inflation supports optimism, but dovish voices challenge both optimists and AUD/USD bulls.

· Mixed sentiment surrounding China and the Reserve Bank of Australia (RBA) also serves as a deterrent for buyers of the Australian dollar, despite the pair reaching multi-day highs.

· With a light economic calendar domestically, cautious sentiment prevails among buyers as attention turns to the Federal Reserve's economic forecasts, dot-plot, and the upcoming speech by Powell.

Today's Scenario: -

AUD/USD experiences the usual pre-Fed unease as it hovers around 0.6770 in the early hours of Wednesday, following a monthly high reached the previous day. The Australian dollar pair reacted positively to disappointing US inflation data and improved market sentiment, reaching a five-week high before retracing from 0.6806. However, recent market expectations that the Fed hawks won't easily back down have posed a challenge for buyers of the Aussie pair.

The latest US inflation data for May was a mixed bag, weighing on the US Dollar after an initial corrective bounce. The headline Consumer Price Index (CPI) fell more than expected, both on a monthly basis at 0.1% and year-on-year at 4.0%. However, the Core CPI, which excludes food and energy, met forecasts at 0.4% monthly and 5.3% yearly. It's noteworthy that the US headline CPI dropped to its lowest level since March 2021, supporting market expectations of a pause in the US Federal Reserve's (Fed) hawkish stance. This, in turn, should have weighed on the US Dollar and allowed AUD/USD to move higher.

The CME's FedWatch Tool indicates a more than 70% chance of no rate hike from the Fed during today's monetary policy meeting. As a result, the US Dollar Index (DXY) fell to its lowest level in three weeks, dragging down the Gold Price, before rebounding from 103.05.

In addition to concerns about US inflation and the Fed, the rate cut by the People's Bank of China (PBoC) supported AUD/USD buyers due to the ties between the Australian dollar and China. Consequently, pair traders disregarded mixed domestic data and fears that the Reserve Bank of Australia (RBA) has limited room to further raise interest rates.

While reflecting the sentiment, Wall Street responded positively to disappointing US inflation data and hopes of no rate hike from the Fed, but US Treasury bond yields remained firm. The US 10-year Treasury bond yields reached a 13-day high of 3.83%, while the two-year yields reached their highest level in three months at 4.70% before easing to 4.67% in the last hours.

Looking ahead, the combination of higher yields and disappointing US inflation data continues to support AUD/USD bulls. Therefore, even though the Fed's status quo is widely anticipated, pair traders will closely monitor the US central bank's economic forecasts, dot-plot, and Chairman Jerome Powell's press conference for clearer guidance.

Diagram of AUD/USD: -

Economic Events: -

Date Event Impact Currency

02:00 (United States) API Crude Oil Stock Change Medium USD

04:15 (New Zealand) Current Account Medium NZD

05:30 (New Zealand) Food Inflation YoY Low NZD

10:00 (Netherlands) Balance of Trade Low EUR

10:30 (Finland) Inflation Rate YoY Low EUR

10:30 (Finland) Inflation Rate MoM Low EUR

10:30 (Finland) CPI Low EUR

11:30 (United Kingdom) GDP 3-Month Avg Medium GBP

11:30 (United Kingdom) Goods Trade Balance Non-EU High GBP

11:30 (United Kingdom) Balance of Trade Low GBP

11:30 (United Kingdom) Construction Output YoY Low GBP

11:30 (United Kingdom) Industrial Production YoY Low GBP

11:30 (United Kingdom) Industrial Production MoM Medium GBP

11:30 (United Kingdom) Manufacturing Production YoY Low GBP

11:30 (United Kingdom) Manufacturing Production MoM Medium GBP

11:30 (United Kingdom) Goods Trade Balance High GBP

11:30 (United Kingdom) GDP YoY Low GBP

11:30 (United Kingdom) GDP MoM High GBP

11:30 (Germany) Wholesale Prices MoM Medium EUR

11:30 (Germany) Wholesale Prices YoY Medium EUR

12:30 (China) FDI (YTD) YoY Medium CNY

12:30 (Slovakia) Inflation Rate MoM Low EUR

12:30 (Slovakia) Inflation Rate YoY Low EUR

12:30 (Slovakia) Core Inflation Rate MoM Low EUR

12:30 (Slovakia) Core Inflation Rate YoY Low EUR

12:30 (Slovakia) CPI Low EUR

13:30 (France) IEA Oil Market Report Medium EUR

14:30 (Euro Area) Industrial Production MoM Medium EUR

14:30 (Euro Area) Industrial Production YoY Low EUR

14:30 (Montenegro) GDP Growth Rate YoY Low EUR

15:00 (Germany) 10-Year Bund Auction Medium EUR

15:30 (Portugal) Inflation Rate MoM Low EUR

15:30 (Portugal) Inflation Rate YoY Low EUR

15:30 (Portugal) CPI Low EUR

15:30 (Ireland) Residential Property Prices YoY Low EUR

15:30 (Ireland) Residential Property Prices MoM Low EUR

16:30 (United States) MBA 30-Year Mortgage Rate Medium USD

16:30 (United States) MBA Mortgage Applications Low USD

16:30 (United States) MBA Mortgage Refinance Index Low USD

16:30 (United States) MBA Mortgage Market Index Low USD

16:30 (United States) MBA Purchase Index Low USD

17:00 (United Kingdom) NIESR Monthly GDP Tracker Low GBP

18:00 (Canada) New Motor Vehicle Sales Low CAD

18:00 (United States) Core PPI MoM Medium USD

18:00 (United States) Core PPI YoY Low USD

18:00 (United States) PPI YoY Low USD

18:00 (United States) PPI MoM High USD

20:00 (United States) EIA Heating Oil Stocks Change Low USD

20:00 (United States) EIA Refinery Crude Runs Change Low USD

20:00 (United States) EIA Crude Oil Stocks Change Medium USD

20:00 (United States) EIA Distillate Stocks Change Low USD

20:00 (United States) EIA Gasoline Production Change Low USD

20:00 (United States) EIA Crude Oil Imports Change Low USD

20:00 (United States) EIA Gasoline Stocks Change Medium USD

20:00 (United States) EIA Cushing Crude Oil Stocks Change Low USD

20:00 (United States) EIA Distillate Fuel Production Change Low USD

21:00 (United States) 17-Week Bill Auction Low USD

23:30 (United States) Fed Interest Rate Decision High USD

23:30 (United States) FOMC Economic Projections High USD

23:30 (United States) Interest Rate Projection - 1st Yr Medium USD

23:30 (United States) Interest Rate Projection - 2nd Yr Medium USD

23:30 (United States) Interest Rate Projection - Current Medium USD

23:30 (United States) Interest Rate Projection - Longer Medium USD

Buy Scenario: -

AUD/USD is struggling to maintain its upward momentum and is trading with slight gains near 0.6770 during the mid-Asian session on Wednesday.

On the other hand, if the US central bank fails to satisfy the policy hawks, mainly due to recent disappointing US inflation data, AUD/USD could surpass the 0.6820 hurdle. In such a scenario, the bulls would target the mid-February highs near 0.7030.

However, before reaching the 0.7000 psychological level, the 61.8% Fibonacci retracement level around 0.6890, also known as the golden ratio, would serve as a resistance level for AUD/USD. Till we do not advise to buy AUD/USD.

Sell Scenario: -

It is worth noting that the overbought conditions indicated by the Relative Strength Index (RSI) and the presence of the 50% Fibonacci retracement level of the pair's downside movement from February to May, around 0.6810, followed closely by the previous monthly high of around 0.6820, are also posing challenges for AUD/USD's upward movement.

Therefore, the pair's momentum traders are likely to wait for a clearer direction until it trades between the support-turned-resistance level around 0.6730 and the previous monthly high around 0.6820.

If the Fed's announcements align with market expectations and provide a hawkish stance, AUD/USD could break below the 0.6730 support level, potentially leading to a decline towards the 23.6% Fibonacci retracement level near 0.6620. Till we do not advise to sell AUD/USD.