USD

  • The Fed left interest rates unchanged as expected at the last meeting with a shift in the statement that indicated the end of the tightening cycle.
  • The Summary of Economic Projections showed a downward revision to Growth and Core PCE in 2024 while the Unemployment Rate was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts in 2024 compared to just two in the last projection.
  • Fed Chair Powell didn't push back against the strong dovish pricing and even said that they are focused on not making the mistake of holding rates high for too long.
  • The latest US CPI slightly beat expectations but analysts expect the Core PCE to print at 0.2% M/M again following the CPI data.
  • The US PPI missed expectations across the board supporting the disinflationary impulse.
  • The labour market continues to soften although Initial Claims keep on hovering around cycle lows while Continuing Claims are ranging at a higher level.
  • The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
  • The hawkish Fed members have been leaning on a more neutral side lately.
  • The market expects the Fed to start cutting rates in March.

AUD

  • The RBA left interest rates unchanged as expected at the last meeting with the central bank maintaining the usual data dependent language.
  • The recent Monthly CPI report missed expectations across the board which is another welcome development for the RBA.
  • The latest labour market report beat forecasts across the board although the unemployment rate rose more than expected.
  • The wage price index surprised to the upside as wage growth in Australia remains strong.
  • The Australian PMIs improved recently but remain in contraction.
  • The market expects the RBA to start cutting rates in June.

AUDUSD Technical Analysis – Daily Timeframe

AUDUSD Technical Analysis
AUDUSD Daily

On the daily chart, we can see that AUDUSD broke below the key support zone around the 0.6680 level and extended the drop to new lows as the buyers folded and the sellers piled in. This breakout has opened the door for a fall all the way down to the 0.65 handle. That’s where we can expect the buyers to step in again with a defined risk below the support to position for a rally into the 0.69 resistance.

AUDUSD Technical Analysis – 4 hour Timeframe

AUDUSD Technical Analysis
AUDUSD 4 hour

On the 4 hour chart, we can see that from a risk management perspective, the sellers will have a much better risk to reward setup around previous support now turned resistance where they will also find the confluence with the red 21 moving average and the downward trendline. The buyers, on the other hand, will want to see the price breaking above the trendline to invalidate the bearish setup and position for a rally into the 0.69 handle.

AUDUSD Technical Analysis – 1 hour Timeframe

AUDUSD Technical Analysis
AUDUSD 1 hour

On the 1 hour chart, we can see that we have a minor downward trendline that is defining the current downtrend on this timeframe. The sellers will likely lean on the trendline as they will also find the confluence with the Fibonacci retracement levels and the red 21 moving average. The buyers, on the other hand, will want to see the price breaking higher to position for a rally into the major downward trendline.

Upcoming Events

Today, all eyes will be on Fed's Waller as the market will be eager to see if he decides to pushback against the aggressive rate cuts expectations. Tomorrow, we will get the US Retail Sales report while on Thursday we will see the latest Australian Jobs data and the US Jobless Claims figures. Finally, on Friday, we conclude the week with the University of Michigan Consumer Sentiment survey.