FundamentalOverview

The USD is weaker acrossthe board following the soft US PPI report yesterday. The market pricing is nowshowing a total of 31 bps of easing by year end compared to 24 bps before thePPI. The focus remains on the US CPI report today.

A hot report will likelycause some trouble in the markets with the stock market looking as the mostvulnerable right now.The best outcome would be a softreport given the overstretched moves in the markets caused by the repricing inrate cuts expectations.

That would likely reversemost of the recent trends and trigger a correction in Treasury yields andtherefore in the US Dollar.

On the AUD side, the RBA softenedfurther its stanceat the last policy decision as it nears the first rate cut. The market isseeing a 67% chance of a 25 bps cut in February although the first fully pricedin cut is seen in April.

The recent Australian Monthly CPI showed core inflation easing withthe Trimmed Mean CPI Y/Y coming in at 3.2%. This has increased the expectationsfor a rate cut already at the February policy meeting. As a reminder, the RBA’sinflation target band is 2-3%.

AUDUSDTechnical Analysis – Daily Timeframe

On the daily chart, we cansee that AUDUSD is bouncing from the 2020 lows as the US Dollar weakenedfollowing the tariffs news and the US PPI data. From a risk managementperspective, the sellers will have a better risk to reward setup around themajor trendline to position for further downside.The buyers, on the other hand, will want to see the price breaking higher toincrease the bullish bets into new highs.

AUDUSD TechnicalAnalysis – 4 hour Timeframe

On the 4 hour chart, there’snot much else we can glean from this timeframe, so we need to zoom in to seesome more details.

AUDUSD TechnicalAnalysis – 1 hour Timeframe

On the 1 hour chart, we cansee that we have an important resistance zone around the 0.62 handle wherethe price got rejected from several times in the past days. This is where wecan expect the sellers to step in with a defined risk above the level toposition for a drop into new lows.

The buyers, on the otherhand, will look for a break higher to increase the bullish bets into the majortrendline. The red lines define the average daily range for today although the price caneasily extend beyond those levels given that we have the US CPI report aheadand it’s a key event.

UpcomingCatalysts

Today, we have the US CPI report, while tomorrow we get the latest US JoblessClaims figures.