- The Australian dollar has trimmed part of the weekly losses, although it will lose almost 2%.
- US consumer sentiment continued to improve in September, while inflation expectations softened.
- RBA’s Lowe: Opened the door to discuss a 25 or 50 basis point rate hike at the next meeting.
- AUD/USD Price Analysis: A Double Bottom Appears on the Daily Chart and Risks Tilt to the Downside.
The AUD/USD trimmed some of its earlier losses but retouched the current year low at 0.6670, racking up weekly losses of more than 2%, spurred on by investors’ positioning on further aggressive Fed tightening, underpinning the USD.
The Australian dollar started the last day of the week trading around 0.6700 but fell to fresh lows for the week, below the daily pivot S1, before regaining some ground after US economic data showed that inflation expectations eased, a sign of relief for investors. AUD/USD is therefore trading at 0.6704, 0.04% above its opening price.
AUD/USD regained some ground but RBA comments could keep the pair on the defensive
Late in the day, the University of Michigan (UoM) Consumer Sentiment Survey for September improved slightly but fell short of estimates of 60.0. Consumer sentiment rose to 59.5 from 58.6 in the previous month, while inflation expectations over a one-year horizon fell to 4.6% from 4.8% in August.
Despite lower inflation expectations, market participants have fully priced in a 75 basis point Fed rate hike at the September meeting. According to sources quoted by Bloomberg, “everything points to a further 75 basis point rate hike by the Fed when it meets next week. The likelihood that it will have to go “big” again in November is also high. “.
Meanwhile, the dollar index, a measure of the dollar’s value, is down 0.21% to 109,511, undermined by US Treasury yields taking a breather, with bond yields 10-year Treasury at 3.432%, below the highest level reached around 3.49%.
Aside from this, on the Australian side, Reserve Bank of Australia (RBA) Governor Philip Lowe said the bank has committed to bringing inflation back to the 2-3% banking target over time, but trying to achieve it, without damaging the economy. Furthermore, Lowe added that at some point, the RBA will go up in 25 basis point increments, adding that they are getting closer to that point, even opening the door to 25 or 50 basis point discussions at the next meeting.
AUD/USD Price Analysis: Technical Outlook
The AUD/USD daily chart shows the pair with a bearish bias. It is worth noting that a double bottom pattern has formed, and if buyers keep the exchange rate above 0.6700, it could pave the way for higher prices. If this scenario plays out, the first resistance for the AUD/USD would be 0.6800, followed by the 20-day EMA at 0.6820 and the 50-day EMA at 0.6885. On the other hand, the first support for the AUD/USD would be last year’s low of 0.6670, followed by the daily low of May 20, 2020 at 0.6506.
Technical levels
Source: Fx Street
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