fundamental overview
USD:
The US dollar weakened on Friday after the US Supreme Court struck down Trump’s reciprocating tariffs. The resulting policy uncertainty is likely to weigh on the greenback, even if nothing has actually changed.
Trump has already imposed new tariffs under a separate law and USTR Greer has said the tariff deals will stand and be honored. Furthermore, the new tariffs actually reduce the effective average tariff rate.
The dollar recovered most of yesterday’s losses but may remain range-bound for now as traders await new catalysts and further developments. The real risk is a potential US-Iran military escalation which could boost the greenback on a serious risk-off mood or lead to a drastic revaluation on strong US data which would have a positive impact on the USD. Fed’s Waller puts a big deal on next week’s NFP report.
AUD:
On the AUD side, the bullish momentum from last month’s sharp revaluation now appears to be slowing down. The currency is supported by a dovish central bank and strong data, but we would need strong reasons for further rate hikes at this point.
Tomorrow, we will get the monthly Australian CPI report. We will likely need a lot of hot data to give the AUD another boost as traders build expectations for the next rate hike. Last week, the currency failed to sustain the rally on another strong jobs report, which could be a sign that we have peaked in sharp revaluation, and a major decline could be in the cards. A soft CPI report could trigger such a recovery.
As a reminder, the RBA raised the cash rate by 25 bps at the last meeting, bringing it back to 3.85%. The central bank delivered a massive surprise as it hinted at two more rate hikes by the end of the year, while the market had expected only one rate hike at the time.
AUDUSD Technical Analysis – Daily Time Frame
AUDUSD – Daily
On the daily chart, we can see that AUDUSD has broken below the first uptrend line which could signal further downside. From a risk management perspective, buyers would have a better risk of being rewarded by a setup around the next trendline to position for a rally to new highs. On the other hand, sellers will look for a break lower to extend the decline into the key trendline around the 0.67 handle.
AUDUSD Technical Analysis – 4 Hour Time Frame
AUDUSD – 4 Hour
On the 4-hour chart, we can see that the price is consolidating between the 0.7090 resistance and 0.7027 level. Market participants are likely to continue playing in the range until we get a breakout from either side.
AUDUSD Technical Analysis – 1 Hour Time Frame
AUDUSD – 1 hour
On the 1-hour chart, there is nothing more we can add here as sellers will likely pile in on a break around resistance and below support, while buyers will step in around support and increase bullish bets on a break above resistance. The red lines define the average daily range for today.
upcoming catalyst
Today we have the weekly US ADP jobs data. Tomorrow, we have the monthly Australian CPI report. On Thursday, we will get the latest US jobless claims data. On Friday, we will conclude the week with the US PPI report. Keep an eye on US-Iran headlines.
