(Technical Analysis) AUD/USD Forex Signal: Greenback Under Pressure Ahead of US Retail Sales Data

Market analysis:

The AUD/USD pair is currently showing signs of a gradual recovery, benefiting from a weakening US dollar. The pair reached 0.6746, the highest level since early September, as the US dollar faced pressure ahead of the Federal Reserve’s upcoming interest rate decision.

This week’s key data release is the US retail sales report for August, which will shed light on consumer activity, a crucial aspect of the American economy. Analysts anticipate a slight dip in retail sales by 0.2%, reflecting persistent inflation concerns.

The market is particularly focused on how this data may influence the Federal Reserve’s next move. There is growing speculation about the size of the anticipated rate cut during Wednesday’s meeting. While former New York Fed president Bill Dudley suggested the Fed should hike by 0.50%, the CME Fed Rate Monitor tool and a Polymarket poll suggest that expectations are evenly split between a 0.50% and 0.25% rate cut.

As the market eagerly awaits the Fed’s decision, Australian economic data also comes into focus. Thursday’s jobs report and next week’s Reserve Bank of Australia (RBA) interest rate decision could further influence AUD/USD price action. The RBA has signalled that it may keep rates higher for longer due to sustained inflationary pressures, even as other central banks, including the Fed, inch closer to rate cuts.

Technical Analysis:

The AUD/USD pair’s recent bounce from last week’s low of 0.6623 is supported by key technical signals. The 50-period and 25-period moving averages have made a bullish crossover, pointing to potential upward momentum. Additionally, the MACD indicator has crossed above the neutral level, while the Stochastic Oscillator is showing overbought conditions.

Moreover, the pair appears to be forming the handle portion of a cup and handle chart pattern, which typically indicates a bullish continuation. If this pattern plays out, the next key resistance level to watch is 0.6800.

Conclusion:

With significant economic events and data releases on the horizon, including US retail sales, the Federal Reserve’s rate decision, and Australian employment numbers, the AUD/USD pair is poised for increased volatility. Traders should watch for a potential breakout above current resistance, or a pullback driven by US dollar strength, depending on how these factors unfold.