AUD/USD is at risk of a big selloff amid weakening Australia's data, more hawkish Fed

FUNDAMENTAL
OVERVIEWUSD:The US dollar came under a little bit of pressure yesterday following
claims from Al-Arabiya that a US-Iran draft agreement has been reached. It was
expected to be announced in a few hours, yet here we are with still nothing
concrete from either side and with reports of both parties still engaged in
negotiations. What is more important now is the US data showing resilience and the Fed
slowly abandoning the easing bias with more and more policymakers talking about
the need of keeping all options on the table, and some explicitly bringing up
rate hike possibilities. That was also signalled in the FOMC meeting minutes. These are generally subtle
moves before a pivot in monetary policy. If nothing changes before the June
meeting, we might be in for a hawkish surprise.In the short-term, a resolution and the reopening of the Strait will likely
weigh on the greenback on falling oil prices and increased rate cut bets. But
if the Strait remains closed for longer and oil prices stay elevated, the risk
of the Fed being forced to hike anyway increases.Today, the focus will be on Fed’s Waller speech on Economic Outlook. The
economic outlook speeches generally contain policy signals. Fed’s Waller has
been a great “leading indicator” for Fed policy in this cycle, and I
think the market would react in a big way if he were to change his dovish
stance now. He’s been worrying about the labour market, but the data has been pointing
to resilient conditions. What is more in tension now is inflation and if he
switches his focus back to that, it might be taken as a signal for potential
rate hikes.AUD:On the AUD side, the RBA
recently softened its tone following a rate hike that pushed the cash rate
to 4.35% with one dissenter voting for keeping rates unchanged. The meeting
minutes and recent remarks from Chief Economist Sarah Hunter indicate that policymakers
are increasingly leaning toward a pause as they gauge the economic impact of
previous hikes.A surprise jump in Australia’s
unemployment rate to 4.5%, the highest level since late 2021, has led traders
to scale back expectations of further rate hikes. Markets are now pricing in just
one last hike in 2026 which is expected to come in September at the earliest. Australia’s Flash PMIs have also showed significantly softer economic activity amid US-Iran conflict and RBA tightening. AUDUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can
see that AUDUSD is consolidating just above
the 0.71 handle. We can expect the buyers to keep stepping in around this
support with a defined risk below it to keep pushing into new highs. The
sellers, on the other hand, will want to see the price breaking lower to
position for a drop all the way down to the major trendline around the 0.69
handle.AUDUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, we can
see more clearly the consolidation between the 0.7100 support and 0.7180
resistance. Market participants will likely continue to play the range until we
get a breakout on either side.AUDUSD TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAMEOn the 1 hour chart, we can
see that the recent price action has formed a potential symmetrical triangle.
Since it’s forming after a bearish impulse, it might signal the continuation of
the bearish momentum, but we will need a downside breakout to confirm it. More aggressive sellers
will likely pile in on the break of the bottom trendline and increase the
bearish bets on a break below the 0.71 support. The buyers, on the other hand,
will look for a break above the top trendline and increase the bullish bets on a
break above the 0.7180 resistance. The red lines define average daily range for today. UPCOMING CATALYSTSToday, we have Fed’s
Waller delivering a speech on the Economic Outlook.
This article was written by Giuseppe Dellamotta at investinglive.com.

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