Chapter 46 09/18 AUDUSD: Price Range May Officially Open This Week, Focus on Shorting at Highs
Summary: On Monday, the AUDUSD saw fresh buying interest but struggled to hold above the range. Improved risk appetite is driving a slight pullback in the US dollar. Attention now turns to the minutes of the Reserve Bank of Australia's meeting scheduled for Tuesday.
Fundamentals
During the Monday New York session, the AUDUSD pair retraced further from the two-week high at the 0.6474 level. The asset is currently trading at 0.6419, marking a 0.15% decline for the day. Investors are in a wait-and-see mode ahead of the monetary policy meetings of both the Reserve Bank of Australia and the Federal Reserve.
The Reserve Bank of Australia is set to release the minutes of its meeting on Tuesday, where the market will dig into further details regarding the RBA's decision to keep the cash rate at 4.10% for the third consecutive month. Additionally, Michelle Bullock, the newly appointed RBA governor, took over the role on Monday. She inherits an economy characterized by moderate inflation, strong employment, and ongoing growth. Market expectations are that Bullock will maintain these policies at her first meeting as Governor next month, with some economists speculating that her first policy shift may involve a rate cut. This could potentially weigh on the Australian dollar.
On the US dollar front, the market anticipates the Fed to keep rates unchanged at the September policy meeting while retaining the possibility of future rate hikes. Fed Chairman Powell will hold a press conference following the decision, and the Fed is expected to make no major changes. However, a dovish tilt in Powell's remarks could trigger a decline in the US dollar, serving as a catalyst for an upward move in the AUDUSD pair.
According to the CME Fedwatch tool, the market has largely priced in the expectation that the Fed will skip a rate hike in September, with the likelihood of a 25-basis-point hike at the November meeting dropping to 27%.
Looking ahead, the RBA’s meeting minutes will be published on Tuesday, with attention then shifting to the Fed's monetary policy decision on Wednesday. These events could lead to currency pair volatility, with investors seeking trading opportunities around the AUDUSD based on the statements and clues provided.
Technical Analysis
The breakthrough of trendline support coupled with the weekly MACD turning negative suggests that the AUDUSD has room to decline below the May low of 0.6357.
We anticipate the AUDUSD to continue oscillating within the range of 0.6415 to 0.6460 in the short term. However, the asset's ascent to 0.6474, the retracement to 0.6426, and then closing at 0.6431 indicate that the upward pressure remains very strong. There is currently no clear directional bias, and we continue to expect the Australian dollar to trade within a range, possibly between 0.6410 and 0.6455, with a potential move downward thereafter. In terms of trading strategy, going short at highs is preferred.
Trading Recommendations
Trading Direction: Short
Entry Price: 0.6430
Target Price: 0.6212
Stop Loss: 0.6525
Valid Until: 2023-10-02 23:55:00
Support: 0.6359, 0.6302, 0.6260
Resistance: 0.6372, 0.6448, 0.6482
