AUD/USD Upside Bias Supported by Hot AU Inflation
Australian inflation accelerated 4% y/y in May, according to Wednesday’s data, marking the fastest pace in six months. The Reserve Bank of Australia was already worried around price pressures and had once again discussed raising rates during this month’s hold, while keeping the door open to further tightening. Yesterday’s hot CPI report likely aggravated these concerns and strengthens the case for a rate hike, while diminishing chances for a shift to a less restrictive chance this year.
AUD/USD erased its gains yesterday after the initial jump, but remains constructive and the monetary policy differential supports further upside. The US Fed is reluctant to pivot, but still sees a rate cut this year, while markets are more aggressive and price in two moves.
The technicals are also favorable, since the Aussie has defended the 38.2% Fibonacci of the last leg up and trades above the EMA200 (black line). This provide a solid basis for higher highs (0.6714) that would bring the 2024 peak in the spotlight (0.6839), although bulls don’t inspire yet confidence for challenging it.
On the other hand, the bar is high for further tightening by the RBA, while the weak Australian economy creates pressure for an easier monetary stance. The Fed meanwhile expects just one cut this year, due to the disinflation slowdown, which supports the greenback.
As such, the there is scope for renewed pressure towards the pivotal 38.2% Fibonacci and the daily Ichimoku Cloud, but sustained weakness below it is not easy given the favorable monetary policy differential.
Stratos Markets Limited (fxcm.com/uk):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Stratos Europe Ltd (trading as “FXCM” or “FXCM EU”), previously FXCM EU Ltd (fxcm.com/eu):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Stratos Trading Pty. Limited (fxcm.com/au):
Trading FX/CFDs carries significant risks. FXCM AU (AFSL 309763). Please read the Financial Services Guide, Product Disclosure Statement, Target Market Determination and Terms of Business at fxcm.com/au
Stratos Global LLC (fxcm.com/markets):
Losses can exceed deposits.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this video are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed via FXCM`s website:
Stratos Markets Limited clients please see: fxcm.com/uk/market-commentary/
Stratos Europe Ltd clients please see: fxcm.com/eu/market-commentary/
Stratos Trading Pty. Limited clients please see: fxcm.com/au/market-commentary/
Stratos Global LLC clients please see: fxcm.com/markets/market-commentary/
Past Performance is not an indicator of future results.
AUD/USD erased its gains yesterday after the initial jump, but remains constructive and the monetary policy differential supports further upside. The US Fed is reluctant to pivot, but still sees a rate cut this year, while markets are more aggressive and price in two moves.
The technicals are also favorable, since the Aussie has defended the 38.2% Fibonacci of the last leg up and trades above the EMA200 (black line). This provide a solid basis for higher highs (0.6714) that would bring the 2024 peak in the spotlight (0.6839), although bulls don’t inspire yet confidence for challenging it.
On the other hand, the bar is high for further tightening by the RBA, while the weak Australian economy creates pressure for an easier monetary stance. The Fed meanwhile expects just one cut this year, due to the disinflation slowdown, which supports the greenback.
As such, the there is scope for renewed pressure towards the pivotal 38.2% Fibonacci and the daily Ichimoku Cloud, but sustained weakness below it is not easy given the favorable monetary policy differential.
Stratos Markets Limited (fxcm.com/uk):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Stratos Europe Ltd (trading as “FXCM” or “FXCM EU”), previously FXCM EU Ltd (fxcm.com/eu):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Stratos Trading Pty. Limited (fxcm.com/au):
Trading FX/CFDs carries significant risks. FXCM AU (AFSL 309763). Please read the Financial Services Guide, Product Disclosure Statement, Target Market Determination and Terms of Business at fxcm.com/au
Stratos Global LLC (fxcm.com/markets):
Losses can exceed deposits.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this video are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed via FXCM`s website:
Stratos Markets Limited clients please see: fxcm.com/uk/market-commentary/
Stratos Europe Ltd clients please see: fxcm.com/eu/market-commentary/
Stratos Trading Pty. Limited clients please see: fxcm.com/au/market-commentary/
Stratos Global LLC clients please see: fxcm.com/markets/market-commentary/
Past Performance is not an indicator of future results.
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