Daily Analysis For AUD/USD  14-06-2023

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.


Support and Resistance Level: -

 Support              Resistance  

 S1 0.6734   -     R1 0.6803

 S2 0.6702  -      R2 0.6840

 S3 0.6665  -      R3 0.6872


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