Published on Jun 16, 2023

Daily Analysis For AUD/USD 16-06-2023

AUD/USD Analysis

Key Points: -

· The AUD/USD pair is experiencing a correction after reaching its highest level since February on Thursday. This correction can be attributed to a modest recovery in the US Dollar (USD) from its multi-week low, which has prompted some profit-taking in the AUD/USD pair.

· The uncertainty surrounding the Federal Reserve's (Fed) stance on interest rate hikes may limit the losses for the pair. The market is uncertain about the timing and pace of the Fed's rate hikes, which could potentially cap the strength of the USD.

· Traders will closely monitor the developments in the USD and the Fed's monetary policy outlook for further guidance on the AUD/USD pair.

Today's Scenario: -

During the Asian session on Friday, the AUD/USD pair faced selling pressure and retraced a portion of its significant rally from the previous day, which had taken it to its highest level since February 22 around the 0.6900 area. Currently trading near 0.6870, the pair is down over 0.20% for the day, breaking its six-day winning streak.

After experiencing heavy losses over the past three days, the US Dollar (USD) saw a modest bounce from its lowest level in over five weeks. This prompted traders to reduce their bullish positions on the AUD/USD pair, particularly after the substantial rally of over 500 pips since the beginning of the week. However, the potential for upside in the USD appears limited due to expectations that the Federal Reserve (Fed) is nearing the peak of its tightening cycle. As a result, market participants exercise caution when positioning for a significant corrective decline in the major currency pair.

It's worth noting that the Fed recently decided to keep interest rates unchanged at the conclusion of its two-day policy meeting earlier this week. However, the central bank indicated that it may still need to raise borrowing costs by as much as 50 basis points by the end of the year. The release of underwhelming US macroeconomic data on Thursday, including Industrial Production, Weekly Jobless Claims, and Retail Sales, has raised doubts about the likelihood of further rate hikes by the Fed to address persistent high inflation. The US Consumer Price Index (CPI) for May remains at 4.0%, which is double the Fed's 2% target.

Uncertainty surrounding the Fed's path for interest rate hikes contributed to a decline in US Treasury bond yields overnight, which could restrain the USD bulls from taking aggressive positions. Additionally, the surprise 25 basis point rate increase by the Reserve Bank of Australia (RBA) last week, along with a hawkish policy statement, may continue to support the Australian Dollar (AUD). This could help limit the downside for the AUD/USD pair, especially in the absence of any significant macroeconomic data from the US. Nonetheless, the pair is still on track to register strong gains for the third consecutive week.

Diagram of AUD/USD: -

Economic Events: -

Date Event Impact Currency

01:30 (United States) Foreign Bond Investment Low USD

01:30 (United States) Net Long-term TIC Flows Medium USD

01:30 (United States) Overall Net Capital Flows Low USD

04:00 (New Zealand) Business NZ PMI Medium NZD

08:30 (Japan) BoJ Interest Rate Decision High JPY

12:30 (Austria) Inflation Rate MoM Low EUR

12:30 (Austria) Inflation Rate YoY Low EUR

12:30 (Austria) Harmonised Inflation Rate YoY Low EUR

12:30 (Austria) Harmonised Inflation Rate MoM Low EUR

12:30 (Austria) CPI High EUR

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

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

12:30 (United States) Fed Bullard Speech Medium USD

13:30 (European Union) ECOFIN Meeting Medium EUR

13:30 (Italy) Inflation Rate YoY Medium EUR

13:30 (Italy) Harmonised Inflation Rate MoM Low EUR

13:30 (Italy) Harmonised Inflation Rate YoY Low EUR

13:30 (Italy) Inflation Rate MoM Low EUR

13:30 (Italy) CPI High EUR

14:30 (Euro Area) Inflation Rate MoM Low EUR

14:30 (Euro Area) Core Inflation Rate YoY Low EUR

14:30 (Euro Area) Inflation Rate YoY Medium EUR

14:30 (Euro Area) Labour Cost Index YoY Low EUR

14:30 (Euro Area) Wage Growth YoY Low EUR

14:30 (Euro Area) CPI High EUR

14:30 (Malta) Inflation Rate YoY Low EUR

15:30 (Portugal) PPI YoY Low EUR

15:30 (Portugal) PPI MoM Low EUR

17:15 (United States) Fed Waller Speech Medium USD

18:00 (Canada) Foreign Securities Purchases Low CAD

18:00 (Canada) Foreign Securities Purchases by Canadians Low CAD

18:00 (Canada) Wholesale Sales MoM Low CAD

19:30 (United States) Michigan Consumer Sentiment High USD

19:30 (United States) Michigan Inflation Expectations Low USD

19:30 (United States) Michigan Current Conditions Low USD

19:30 (United States) Michigan 5 Year Inflation Expectations Low USD

19:30 (United States) Michigan Consumer Expectations Low USD

22:30 (United States) Baker Hughes Oil Rig Count Low USD

22:30 (United States) Baker Hughes Total Rig Count Low USD

Buy Scenario: -

The AUD/USD bulls face a challenge as they struggle to close above the key resistance line that extends from April 2022, near the 0.6900 psychological level at the time of writing, further accentuating the overbought RSI conditions.

Nevertheless, the presence of bullish signals from the Moving Average Convergence Divergence (MACD) indicator and the pair's ability to trade above the 200-day Exponential Moving Average (EMA), as well as the ascending support line from early June, keeps buyers hopeful for further gains in the AUD/USD pair.

Conversely, to validate a daily close above the aforementioned multi-month resistance line, the pair would require confirmation from the February 20 swing high around 0.6920 and the psychological level of 0.7000. Only then would the bulls be convinced to target the mid-February 2023 peak of 0.7030. Till we do not advise to buy AUD/USD.

Sell Scenario: -

In the short term, the crucial support to monitor for intraday sellers lies at May's high of 0.6820. If that level is breached, attention will shift to the immediate support line and the 200-EMA around 0.6785 and 0.6760, respectively. Till we do not advise to sell AUD/USD.