Fundamental Overview

Yesterday, the USD weakened across the board following the US PPI release where the data came in line with expectations. The reaction showed that the market is eager to buy risk and that even little signs of better inflation figures can trigger positive risk sentiment.

This will be important to remember in light of today’s US CPI report where in line or soft figures will likely lead to more USD selling and strong risk-on sentiment. Conversely, hot readings might have the opposite effect with the USD bid across the board.

AUDUSD Technical Analysis – Daily Timeframe

AUDUSD Technical Analysis
AUDUSD Technical Analysis

On the daily chart, we can see that AUDUSD tonight hit the wall around the 0.6650 level. This resistance held for months and a break above it supported by benign US CPI figures should open the door for a rally back into the 0.6870 level.

On the other hand, hot CPI readings should see the pair getting smacked back down to the first support around the 0.6557 level.

AUDUSD Technical Analysis – 1 hour Timeframe

AUDUSD Technical Analysis
AUDUSD 1 hour

On the 1 hour chart, we can see that the price yesterday bounced on the trendline following the US PPI release and rallied back into the key resistance. A lot will depend on the US CPI report, but we can say that the risk/reward at this level for the sellers might be tempting to position short into the release.

For more conservative sellers, waiting for a break below the trendline and especially below the 0.6557 support might be a better idea to position for a drop into the 0.6464 level next.

The buyers, on the other hand, don’t have a good risk/reward setup entering around these levels before the release. For them it would be better to wait for the actual release where in line or soft figures should trigger a breakout and give the opportunity to go long into the 0.6870 level.

Upcoming Catalysts

Today all eyes will be on the US CPI report although we will also get the US Retail Sales data at the same time. Tomorrow, we have the Australian Labour Market report and later in the day the latest US Jobless Claims figures where it will be interesting to see whether the last week’s numbers were the start of a trend or just a fluke.