- Money market futures have fully priced in a 75 basis point rise, although 1 in 4 expect a 100 basis point rise.
- AUD/USD gained some traction bolstered by US dollar weakness.
- AUD/USD Price Analysis: Positive Divergence on the Daily Chart Suggests Exhaustion of Sellers.
The AUD/USD stopped the bleeding and jumped from weekly lows around 0.6700 after the US Producer Price Index report for August eased some of Tuesday’s concerns about the CPI, which sent most of the risk assets, while the USD rose above 110.00, on renewed fears of inflation. However, at the time of writing, sentiment is mixed, although it appears that traders are on standby.
On Wednesday, the currency started trading around 0.6720 and approached its weekly lows near 0.6700, forming a double bottom as the AUD/USD hourly chart shows, and rose towards its daily high at 0.6760. At the time of writing, the AUD/USD is trading at 0.6737, up 0.17% from its opening price.
Inflation data in the US has grabbed all the headlines in recent days. On Tuesday, the core CPI for August crossed the threshold of 7% year-on-year, above estimates, fueling speculation that the Fed could raise rates by 100 basis points at the September meeting. However, the August Producer Price Index (PPI) has tempered concerns as the figures were in line with estimates and provided positive news regarding supply chain disruptions.
Reflecting this is the US Dollar Index losing some traction, down 0.09% below 110,000. At the same time, the US 10-year Treasury yield is showing signs of exhaustion, flat at around 3,414%.
An absent economic docket left the Aussie adrift on US dollar dynamics. Australian data released during the week showed business confidence improving. Later, Australian employment data will be released. The August job change is estimated at 35,000, while the unemployment rate is expected to remain at 3.4%.
In the United States, the economic calendar will include the Fed’s regional manufacturing indexes, along with jobless claims and retail sales data for August.
AUD/USD Price Analysis: Technical Outlook
AUD/USD has a bearish bias, but a doji on the daily chart suggests selling pressure is evaporating. US dollar positioning is overextended, and with the Relative Strength Index (RSI) printing higher lows, contrary to price action making lower lows, a positive divergence is emerging. That said, the major currency could rise ahead of next week’s US FOMC monetary policy decision.
To the upside, resistance lies at 0.6800, which once broken exposes the 20-day EMA at 0.6839, before the 50-day EMA at 0.6890. On the flip side, AUD/USD’s first support would be 0.6700, followed by year lows at 0.6681 and 0.6600.
Source: Fx Street
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