RBA Shielding Aussie Dollar Against Hawkish Fed

AUD/USD ANALYSIS & TALKING POINTS

• Two hawkish central banks (RBA and Fed) battle it out.
• U.S. jobless claims in focus later today.
• AUD/USD sandwiched between 0.69 and 0.70 respectively.

AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP

The Australian dollar showed its resilience this Thursday morning after a hatful of Fed officials announced rather aggressive and consistent commentary around the Fed’s monetary policy going forward. All speakers cited the possibility of further rate hikes should inflation remain sticky with a tight labor market a key contributor. Some market participants went so far as to wager bets on a 6% terminal rate (currently 5.130% as shown below).

IMPLIED FED FUNDS FUTURES

Source: Refinitiv

Australian’s were rather unhappy after the RBA’s last meeting that could point to further rate hikes going forward due to inflationary pressures. The slightly weaker dollar this morning is giving support for Aussie bulls including the rise in some key Australian commodity exports.

That being said, the key data point for today will be back on the U.S. via jobless claims (see economic calendar below) where markets will be looking for some congruency with the prior Non-Farm Payroll (NFP) report. In short, a miss on estimates could weigh on the AUD against the U.S. dollar. Tomorrow will provide further insights to the RBA rate decision through their policy minutes and I suspect they will be rather hawkish in nature.

ECONOMIC CALENDAR

Source: DailyFX economic calendar

TECHNICAL ANALYSIS

AUD/USD DAILY CHART

Chart prepared by Warren Venketas, IG

Daily AUD/USD price action has shown a stubbornness by bulls for pries to fall below trendline support (black). While much of the AUD/USD price moves are USD related, data dependency will prove crucial moving forward. The Relative Strength Index (RSI) suggests hesitancy favoring neither bullish nor bearish momentum; however, a break and candle close either below the 0.6900 psychological support handle or above the 0.7000 level (likely as a result of a fundamental catalyst), would provide markets with some short-term directional bias. The 0.6900 break will coincide with trendline support and 50-day SMA (yellow) effecting a large downturn for the pro-growth currency.

Key resistance levels:

Key support levels:

IG CLIENT SENTIMENT DATA: BEARISH

IGCS shows retail traders are currently LONG on AUD/USD, with 59% of traders currently holding long positions. At DailyFX we typically take a contrarian view to crowd sentiment resulting in a short-term bearish disposition.

Contact and followWarrenon Twitter:@WVenketas