US:
- The Fed left interest rates unchanged as expected at the last meeting.
- The macroeconomic projections were revised higher, and the Dot Plot showed that the FOMC still expects another rate hike by the end of the year with less rate cuts in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
- The US CPI yesterday beat expectations on the headline figures, but the core measures came in line with forecasts and the market’s pricing barely changed.
- The labour market remains fairly solid as seen last week with the NFP report and yesterday’s Jobless Claims.
- The ISM Manufacturing PMI beat expectations while the ISM Services PMI came in line with forecasts in another sign that the US economy remains resilient.
- The Fed members continue to cite elevated long-term yields as a reason to proceed carefully and likely pause in November as well.
- The market doesn’t expect the Fed to hike anymore.
Australia:
- The RBA kept interest rates unchanged as expected as they are seeing inflation returning to target with the current level of interest rates.
- The latest monthly CPI showed that core inflation is slowing.
- The labour market is weakening as we got a big miss in July and the bulk of jobs added in August were part time.
- The Australian Manufacturing PMI fell further into contraction while the Services PMI jumped back into expansion.
- The market expects the RBA to hold rates steady at the next meeting as well.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the AUDUSD pair got rejected by the downward minor trendline and sold off following the US CPI release. We continue to see a big divergence with the MACD which is usually a sign of weakening momentum, but the pattern of lower highs might be an indication that the sellers are still stronger than buyers and that the bias is skewed to the downside.
AUDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price action in AUDUSD remains a real mess with erratic movements and spikes here and there. This is what we can expect from rangebound markets, which is why the best strategy is generally to sit out and wait for a clear fundamental catalyst before getting back into the market. Yesterday’s US CPI doesn’t look like a good reason as the pricing on interest rates expectations hasn’t changed as the core measures came in line with expectations. Nevertheless, in case we see a pullback, the sellers are likely to lean on the resistance around the 0.6360 level where we can also find the 38.2% Fibonacci retracement level.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the bearish setup around the 0.6360 level. Alternatively, if the bearish momentum remains strong, the sellers might already pile in on the break of the recent low at 0.6312. The buyers, on the other hand, are likely to step in around this low with a defined risk below it to position for a rally into the trendline and completely erase the US CPI losses.
Upcoming Events
Today the only notable event on the agenda is the University of Michigan Consumer Sentiment report although it has lost its market moving ability lately. Only big surprises are likely to have an impact on the market.
