Fundamental Analysis
U.S.:
- September CPI: Headline inflation eased to 2.4% y/y, aligning closer to the Fed’s target, though core CPI rose by 3.3% y/y, driven by housing and insurance.
- September Jobs: The U.S. added 254,000 jobs, surpassing expectations, which may prompt the Fed to maintain high rates short-term.
- Treasuries: 10-year yields rose to 4.24% this week, reflecting growth optimism and potential for sustained high rates.
Australia:
- September CPI: Inflation slowed to 5.4% y/y, which could support the RBA’s wait-and-see approach.
- September Employment: Only 6,700 jobs were added, indicating a cooling economy and reinforcing expectations that the RBA will hold rates steady.
The AUDUSD has faced downward pressure largely due to divergent fundamentals between the U.S. and Australia. As the Fed considers sustained high rates, driven by core inflation and job growth, the RBA adopts a more cautious approach amidst slowing inflation and weaker job gains. Additionally, rising U.S. Treasury yields have made the dollar more attractive than the AUD, intensifying the pair’s bearish trend.
In the short term, should U.S. rates remain elevated with Treasury yields climbing, AUDUSD is likely to stay under pressure. However, any shifts in RBA policy or signs of a U.S. economic slowdown could provide support for the Australian dollar.
Technical Analysis
AUDUSD, H2
- Supply Zones (Sells): 0.6666 and 0.6677
- Demand Zones (Buys): 0.6621
The pair has been trending lower throughout October, forming a one-week accelerated bearish channel. The last validated resistance level at H4 is 0.6695.
In this context, further selling is expected as long as prices stay below the daily open (D1) at 0.6636, with intraday targets at supports 0.6614, 0.66, and the average bearish range at 0.659. A sustained break would allow for a broader downward move toward August 15 support at 0.6557.
However, intraday exhaustion of bears could drive a break above the initial supply zone around 0.6635 and local resistance at 0.6644, potentially extending toward 0.6661 intraday and the high-volume node around 0.6677 next week. This correction would still maintain the bearish structure as long as it remains below the key resistance at 0.6661.
Technical Summary
- Corrective Bearish Scenario: Intraday sells below 0.6635 (upon confirmed PAR* pattern), targeting 0.6614, 0.66, 0.6590, and extension to 0.6557. Use a 1% SL.
- Bullish Continuation Scenario: Buys above 0.6644, targeting 0.6661, 0.6677, or extended to 0.6690. Employ a 1% SL with low lot size to accommodate volatility.
Always await the formation and confirmation of a *Reversal Exhaustion Pattern (PER) on M5 as outlined here before entering key zones.
Naked POC
POC = Point of Control: A zone of highest volume concentration.
