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AUDUSD Technical Analysis – Chances of Further Upside After Failed Breakout


WE:

  • The Fed left interest rates unchanged as expected at the last meeting.
  • Macroeconomic projections have been revised upwards as the economy has shown much stronger resilience than expected and the Dot Plot showed that the majority of members still expect another rate hike by end of the year with fewer rate cuts in 2024.
  • Fed Chairman Powell reiterated their reliance on data, but added they would proceed with caution.
  • The latest US Core PCE was in line with expectations, with disinflation remaining stable.
  • The job market remains quite strong, as we saw last week with another strong increase in jobless claims and the NFP report.
  • The ISM Manufacturing PMI beat expectations while the ISM Services PMI came in line with forecasts, a further sign that the US economy remains resilient.
  • The market no longer expects the Fed to raise rates.

Australia:

  • The RBA has kept interest rates unchanged as expected as it sees inflation returning to target with the current level of interest rates.
  • The latest monthly CPI showed that core inflation is slowing.
  • The job market is weakening as we experienced a big shortfall in July and the majority of jobs created in August were part-time.
  • Australia’s manufacturing PMI contracted further, while the services PMI returned to expansion.
  • The market also expects the RBA to keep rates steady at the next meeting.

AUDUSD Technical Analysis – Daily Timeline

AUDUSD Daily

On the daily chart, we can see that the AUDUSD pair was diverging with the MACD just as it was trying to break out of the range. This is usually a sign of weakening momentum, often followed by pullbacks or reversals. In this case, the pair failed to hold the breakout and bounced back into the range. Buyers may now have enough conviction to target the high end of the range around the 0.65 handle.

AUDUSD Technical Analysis – 4 Hour Timeframe

AUDUSD 4 hours

On the 4-hour chart, we can see that the price action within the range is a complete disaster with frequent spikes and erratic movements. From a risk management perspective, buyers would be better off waiting for price to move back into the lower bound of the regression channel around the 0.6380 level where they will also have the confluence with the red 21 moving average. Sellers , on the other hand, will want to see the price move below the support zone around the 0.6370 level to position itself towards new lows again.

AUDUSD Technical Analysis – 1 Hour Timeframe

AUDUSD 1 hour

On the hourly chart, we can take a closer look at the bullish setup with the 61.8% Fibonacci retracement level adding further confluence to support around the 0.6380 level. As mentioned earlier, sellers will want to see price move below the channel’s lower boundary to invalidate the bullish setup and position themselves for further selling to new lows.

Events to come

This week, the market should focus on the CPI report, as that is what could change expectations for the next FOMC rate decision. Today we will see US PPI data and later today the FOMC meeting minutes. Tomorrow it will be time for the US CPI report, and at the same time we will also have the latest jobless claims figures. On Friday, we wrap up the week with the University of Michigan Consumer Sentiment Report.


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