- The Fed left interest rates unchanged as expected with basically no change to the statement.
- Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
- The recent US Core PCE came in line with expectations.
- The labour market is starting to show some weakness as Continuing Claims yesterday showed another increase and the NFP data last Friday missed across the board.
- The US Consumer Confidence fell for the third consecutive month although the data beat expectations.
- The US ISM Manufacturing PMI last week missed expectations by a big margin, followed later on Friday with a disappointing ISM Services PMI, although the index remained in expansion.
- The market doesn’t expect the Fed to hike anymore.
- The RBA raised the cash rate by 25 bps as expected as the central bank judged that the move was warranted to be more assured that inflation would return to target in a reasonable timeframe.
- The CPI report recently surprised to the upside prompting the market to price in a higher chance of another rate hike from the RBA in November, which is what we eventually got.
- The RBA Governor Bullock downplayed the beat in the CPI data and made the market to pare back the rate hike bets.
- The labour market continues to weaken as seen also recently with the miss in the employment change and the losses in full-time employment.
- The Australian Manufacturing PMI fell further into contraction with the Services PMI plummeting back into contraction as well.
- The market expects the RBA to hold rates steady at the next meeting.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the AUDUSD pair last week surged into the key resistance around the 0.65 handle but erased all the gains this week. It looks like the US Dollar is starting to be seen as the best out of a bad bunch as recessionary data continues to accumulate. The Fedspeak recently has also been leaning on the hawkish side as the Fed wants to keep another rate hike on the table.
AUDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see the selloff from the key 0.65 resistance zone found support around the 0.6390 level where we had also the trendline for confluence. The price yesterday broke decisively below it, invalidating the bullish setup. The sellers should now be more in control and from a risk management perspective, they are likely to lean on the downward trendline where there’s the confluence with the previous support turned resistance, the red 21 moving average and the Fibonacci retracement level.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the bearish setup around the 0.6390 level. We can also notice that the latest leg lower diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be a confirmation for a pullback into the resistance and then a continuation of the bearish trend. The buyers, on the other hand, will want to see the price breaking above the resistance to invalidate the bearish setup and position for a rally back to the highs.
Today the only market moving event will be the release of the University of Michigan Consumer Sentiment report.