- The Australian dollar trimmed some of the weekly losses, though it is set to lose almost 2%.
- US Consumer Sentiment continued improving in September, while inflation expectations easied.
- RBA’s Lowe: Opened the door for discussing 25 or 50 bps rate hike in the next meeting.
- AUD/USD Price Analysis: A double-bottom surfaced in the daily chart, and risks are skewed to the downside.
The AUD/USD pares some of its earlier losses but refreshed the year-to-date (YTD) low at 0.6670, accumulating weekly losses of more than 2%, spurred by investors positioning ahead of further Fed aggressive tightening, underpinning the greenback.
The Australian dollar began the last trading day of the week, trading around 0.6700 but slipped to new YTD lows, below the S1 daily pivot, before recovering some ground after US economic data showed that inflation expectations dipped, a sign of relief for investors. Therefore, the AUD/USD is trading at 0.6704, above its opening price by 0.04%.
AUD/USD recovered some ground, but RBA’s dovish commentary could keep the pair on the defensive
Of late, the University of Michigan (UoM) Consumer sentiment survey in September slightly improved but missed estimations of 60.0. The Consumer Sentiment rose by 59.5 vs. 58.6 in the prior month, while inflation expectations in a 1-year horizon slumped to 4.6% from 4.8% in August.
Even though inflation expectations are lower, market participants have fully priced in a Fed’s 75 bps rate hike in the September meeting. Sources cited by Bloomberg said, “Everything points to another 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 elevated, too.”
In the meantime, the US Dollar Index, a measure of the buck’s value, edges lower by 0.21%, down at 109.511, undermined by US Treasury bond yields, taking a respite, with the 10-year benchmark note rate at 3.432%, below the highest level reached around 3.49%.
Aside from this, on the Australian side, the Reserve Bank of Australia (RBA) Governor Philip Lowe said that the bank is committed to returning inflation to the 2-3% bank target over time but trying to achieve it, without damaging the economy. Furthermore, Lowe added that at some point, the RBA would hike in 25 bps increments, adding that they’re getting closer to that point, even opening the door for discussions of 25 or 50 bps in the next meeting.
AUD/USD Price Analysis: Technical outlook
The AUD/USD daily chart depicts the pair as downward biased. It’s worth noting that a double bottom pattern formed, and if buyers keep the exchange rate above 0.6700, it could pave the way for higher prices. If that scenario plays out, the AUD/USD first resistance 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 AUD/USD’s first support would be the 0.6670 YTD low, followed by May 20, 2020, daily low at 0.6506.