Be alert for a potential breakout in AUDUSD – Technical Analysis sparks curiosity

US

• The Fed left interest rates unchanged as expected at the last meeting.
• The macroeconomic projections were revised higher, and the Dot Plot showed that the FOMC still expects another rate hike by the end of the year with less rate cuts projected in 2024.
• Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
• The US CPI last week beat expectations on the headline figures, but the core measures came in line with forecasts and the market’s pricing barely changed.
• The labour market remains fairly solid as seen once again yesterday with the beat inJobless Claims, although continuing claims missed for a second time in a row.
• The US PMIs recently showed that the US economy remains pretty resilient.
• The University of Michigan Consumer Sentiment report last Friday missed across the board with the inflation expectations figures spiking back up.
• The US Retail Sales this week beat expectations by a big margin with positive revisions to the prior figures.
• The Fed members continue to cite elevated long-term yields as a reason to proceed carefully and will likely pause in November as well.
• Fed Chair Powell yesterday highlighted the rise in long term yields as well and the need to “proceed carefully”.
• The market doesn’t expect the Fed to hike anymore.

Australia

• The RBA kept interest rates unchanged as expected as they are seeing inflation returning to target with the current level of interest rates.
• The latest monthly CPI showed that core inflation is slowing.
• The labour market continues to weaken as seen this week with the miss the employment change and the losses in full-time employment.
• The Australian Manufacturing PMI fell further into contraction while the Services PMI jumped back into expansion.
• The RBA Minutes were surprisingly hawkish and it looks like the central bank might squeeze in another rate hike if the underlying inflation doesn’t slow faster in the next couple of months.
• The market expects the RBA to hold rates steady at the next meeting as well.

AUDUSD Technical Analysis – Daily Timeframe

On the daily chart, we can see that the AUDUSD pair continues to fall but in a rangebound manner as the bearish momentum remains weak. The price recently bounced on the previous low but got rejected from the resistance around the trendline.

AUDUSD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the recent price action formed a descending triangle with the trendline and the support at 0.6285 defining the pattern. The best strategy would be to wait for a breakout on either side of the pattern and go with the flow. From a risk management perspective though, the sellers should lean on the trendline with a defined risk above it to position for a break below the support. The buyers, on the other hand, should lean on the support to position for a rally into the trendline targeting a breakout.

AUDUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more closely the price action within the triangle that is generally messy and quite erratic. In fact, as previously mentioned, the only levels to watch should be the trendline and the support.