FUNDAMENTAL ANALYSIS
Andrew Sun
AUD/USD
The Australian Dollar slid 0.44% over the past week to trade at 0.6894 amidst better than expected US Retail Sales and consumer confidence data, before staging a late rally as markets digested some Fedspeak comments. On Friday, US Retail Sales for June had grown 1.0% month-on-month, which beat market expectations of an increase of 0.8%, pushing the Aussie Dollar lower on the back of a stronger US economy. Moreover, the University of Michigan’s Consumer Confidence rose to 51.5 from 50.0, versus market expectations of 49.9. However, Atlanta’s Fed President Raphael Bostic commented late on Friday that June’s 75 basis points rate hike was a “big move” and added that the Fed wants policy transition to be orderly. This more dovish view set the stage for a late surge in the AUD/USD pair as investors believe that the interest rate differential will be smaller in the future.
EUR/USD
The Euro fell 0.79% over the past week to trade at 1.008, as better than expected US Retail Sales and consumer confidence data pushed the greenback higher. In addition, a dovish European Central Bank (ECB) has seen the interest rate differential continue to widen between Europe and the US, which has put further pressure on EUR/USD. We expect EUR/USD to be volatile in the coming days, as the ECB has finally begun to follow the rest of the world as it is set to announce its first rate rise since 2011 this Thursday. In addition, this Wednesday brings the final estimate of the EU June Consumer Price Index, widely expected to be 8.6%.
TECHNICAL ANALYSIS
Anton Ragusa
AUD/USD
The AUD continues its mild weakness against the USD, slowly falling to support levels which have not been tested since the COVID crash created huge demand for the USD. With both central banks maintaining hawkish stances towards monetary policy, there is no clear direction for AUD/USD, but with the current risk-averse nature of the market, it is likely that AUD will continue to fall. Major resistance levels at 0.690 – 0.700 and 0.686 will be reversal points for the continued move downwards if the AUD can find significant demand for the move up from this current support level. Overall, sentiment remains slightly bearish for the AUD but could easily turn neutral given a few bullish fundamental catalysts.
EUR/USD
The EURO continues to fall against the USD, being close to a 1:1 exchange rate for the first time since 2002. The outlook continues to look bearish for the EURO and there will likely be only small relief bounces for the foreseeable future due to the hawkish stance of the Federal Reserve and the current socio-political climate in Europe. Having finally broken down from the May-June range after some considerably weak price action, the EURO has bounced off the major support level at 1 USD. This however, is unlikely to be a reversal point due to the continued weakness of the EURO, having crashed below previous major support levels without much resistance. This suggests that the current upwards move is likely to either bounce off the resistance at 1.018 or at the range lows around 1.035. Overall, the sentiment remains bearish and this will certainly continue until we see some significant change in the fundamentals.