The AUDUSD pair remains volatile within an expanding wedge as the market seeks new catalysts. Currently, the USD has regained some momentum, but lacks a decisive driver for a lasting trend. Traders anticipate developments on both sides to influence future movements.<\/p>\n
On the Australian front, the upcoming quarterly inflation report is in focus. Markets anticipate 58 basis points of easing by the year’s end, with an 85% probability of a rate cut at the August meeting. Unexpected inflation figures could shift market expectations significantly. Lower-than-expected data may lead to higher rate cuts, while higher figures could boost the AUD short term.<\/p>\n
In technical analysis, the AUDUSD daily chart shows rejection at the top trendline, targeting 0.6350 support. Buyers need to surpass this trendline to aim for a 0.6900 rally. The 4-hour chart indicates support around 0.6485, where buyers may intervene. Sellers look for a potential break towards 0.6350. On the 1-hour chart, a minor downward trendline highlights bearish momentum, offering sellers favourable risk\/reward. Buyers await a break above this trendline to counter the bearish outlook.<\/p>\n
Upcoming catalysts include US job data, consumer confidence, GDP, FOMC rate decision, and various other economic indicators which will influence AUDUSD movements.<\/p>\n
The key catalyst mentioned, the Australian quarterly inflation report, has now arrived. Australia\u2019s Q1 CPI data for 2024 came in hotter than expected at 3.6% year-over-year, beating the forecast of 3.5%. For derivative traders, this unexpected strength challenges strategies that were based on an imminent rate cut, making put options much riskier now.<\/p>\n
Following this report, we have seen market pricing for rate cuts by the Reserve Bank of Australia be pushed back dramatically. The 85% chance of an August rate cut has vanished, with swaps markets now suggesting rate cuts are unlikely until 2025. This significant policy repricing provides a strong fundamental reason to be positioned for a higher exchange rate.<\/p>\n
On the other side of the trade, the US dollar faces a week packed with its own data, including the Federal Reserve’s policy decision. Given recent statements from members like Powell suggesting patience on cuts, it will take a significant downside surprise in US data to weaken the greenback further. Therefore, we believe the path of least resistance for the pair may be upwards in the near term.<\/p>\n
We should now view the technical picture through this new fundamental lens. A break above the upper trendline seems more probable, so buying call options with a strike price targeting the 0.6900 handle could be a viable strategy. Implied volatility will likely rise heading into the slew of US data releases, so establishing positions before then could be advantageous.<\/p>\n
From a risk management standpoint, the minor support zone around 0.6485 remains a key level to watch. Historically, strong US jobs data, like the upcoming NFP report, can swiftly reverse sentiment and trigger a drop. Traders could use this level as a point to either take profit on long positions or buy protective puts to hedge their exposure.<\/p>\n
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