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FUNDAMENTAL
OVERVIEWUSD:The US Dollar recovered a
little yesterday as Trump announced that he reached a “framework” of a
deal for Greenland and that he won’t go ahead with tariffs. Moreover, we got
Fed’s Cook hearing yesterday and the Supreme Court appeared likely to deny
Trump’s request to immediately fire her. Barring another
geopolitical escalation somewhere, the focus will switch to the US data and the
Fed’s interest rate path for 2026. The data has been improving recently, especially
on the labour market side. If we more of such or even better, that will likely
keep supporting the US Dollar as rate cuts get slowly priced out. Right now, the market is pricing a total of 46 bps of easing by year-end.AUD:On the AUD side, we got a
blockbuster Australian
jobs report today with the unemployment rate falling to 4.1% vs 4.4%
expected. This was a big hawkish surprise and the market responded by increasing
the probabilities for a rate hike already at the upcoming meeting to 58%. As a reminder, the RBA at
the last policy decision sounded more hawkish following a series of
higher-than-expected inflation reports. The central bank also discussed whether
a rate hike might be needed at some point in 2026. We still have the quarterly
inflation report before the RBA’s meeting which could take the probabilities to
50% if we get soft figures. Conversely, stronger than expected data will seal
the rate hike and could even raise the total tightening expected by year-end,
which is seen at 47 bps at the moment (two rate hikes).AUDUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can
see that AUDUSD extended the rally into new highs following the blockbuster
Australian jobs report. The natural target for the buyers is the top trendline near
the 0.69 handle. If the price gets there, we can expect the sellers to step in
with a defined risk above the trendline to position for a drop back into the
0.6400 handle.AUDUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, we can
see that we have an upward trendline defining the bullish momentum on this
timeframe. If we get a pullback, we can expect the buyers to lean on the
trendline with a defined risk below it to position for a rally into new highs.
The sellers, on the other hand, will look for a break lower to pile in for a
drop into the 0.6660 level next.AUDUSD TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAMEOn the 1 hour chart, we can
see that the price already reached the upper bound of the average daily range for today. In such instances, we
can generally see some consolidation or a pullback before the next move. Again,
the buyers will have a better risk to reward setup around the trendline, while
the sellers will need a break lower to open the door for new lows.UPCOMING CATALYSTSToday we get the latest US Jobless Claims figures, while tomorrow we conclude
the week with the US Flash PMIs.
This article was written by Giuseppe Dellamotta at investinglive.com.
💡 DMK Insight
The recent recovery of the US Dollar signals a potential shift in market sentiment, and here’s why that matters: Trump’s announcement regarding Greenland and the halt on tariffs could ease trade tensions, which often weigh on the dollar. This is crucial for traders, especially those in forex, as a stronger dollar typically leads to lower commodity prices and can impact currencies like the Euro and Yen. Keep an eye on the Fed’s stance; with Cook’s hearing suggesting a dovish approach, the dollar’s strength might be short-lived. If the dollar breaks above recent resistance levels, it could trigger further buying, but a reversal could also lead to a sell-off, especially if inflation data comes in hot. Watch for key economic indicators this week, particularly any shifts in employment data or consumer sentiment, as these will provide insight into the Fed’s next moves. On the flip side, if the Supreme Court’s decision on Cook leads to instability within the Fed, it could create volatility in the dollar. Traders should monitor the 1.10 level for the Euro against the dollar; a break below could signal a stronger dollar trend. Overall, the next few days are pivotal for positioning in both forex and commodities markets.
📮 Takeaway
Watch the Euro at the 1.10 level against the dollar; a break below could signal a stronger dollar trend amid shifting market sentiment.
