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AUD/USD’s hourly chart offers neat lines before a stormy 24 hours. The FOMC vote could matter more than Powell or the dot plot, while local labour market data will shape expectations for the RBA’s next move.
- Fed likely cuts 25bp, but dissents could dominate
- Hawkish surprise risks USD rebound
- Aussie jobs report key for RBA easing path
- AUD/USD uptrend faces waning momentum
AUD/USD Outlook Summary
First impression of the AUD/USD hourly chart is one of clean lines before what promises to be a complex 24 hours. Even though many of the levels will be cannon fodder for whatever the Fed meeting dishes up, it provides something akin to a blueprint for traders to assess potential setups before the release of Australia’s August employment report, an event that has flown under the radar this week despite being a key data point that may determine whether the RBA cuts rates again.
FOMC Vote Key
A lot has already been written and said about the September FOMC decision, but with so many variables to consider, whether it will be useful to traders is questionable, so I’ll keep it quick. With six cuts priced by the end of next year, markets are looking for very dovish forecasts and commentary to accompany what is likely to be a 25bp cut. Recent price action in rates and the USD says as much.
Source: TradingView
That has arguably created asymmetric risks. Put simply, it may only take a modest hawkish surprise relative to pricing to spark a sizeable reversal of recent trends. But many traders already recognise that. Where this meeting differs from those in the past is the composition of the FOMC.
We saw a split in voting along political lines at the July meeting, with Trump appointees Waller and Bowman dissenting in favour of a 25bp cut. With Stephen Miran, another Trump appointee, voting this time, there is a perceived risk we could see the three members dissent in favour of a supersized cut if the rest of the committee opts for 25bp.
It’s pure speculation, but even if the Fed’s forecasts and commentary are less dovish than market pricing, a bloc of members voting along political lines could easily override the messaging. That may weigh on the USD and back end of the Treasury curve, fuelling concerns that policy will be set for reasons other than economics moving forward. But if those dissents don’t materialise, a relief rally in U.S. assets hit hard by Fed independence concerns could be epic!
Unless we see a 50bp move, the vote—rather than the dot plot or Powell’s press conference—may prove the key piece of information to trade off.
Don’t Dismiss Aussie Jobs Impact
After the Fed, attention among AUD/USD traders will quickly turn to the August jobs report. Labour force surveys often pass without fuss, but with the RBA’s inflation forecasts underpinned by unemployment not exceeding 4.3% through 2027, the bar is low for more cuts should labour market conditions deteriorate. If unemployment were to rise, it would risk inflation undershooting. The opposite would apply if unemployment fell.
Source: Bloomberg
On the back of stronger household consumption and sticky price pressures, swaps traders have pared expectations for how much easing the RBA will deliver this cycle. A 25bp cut in November is still highly favoured at 88%, with a full move priced by December. An additional cut beyond that is not yet deemed a lock. That’s why, outside of quarterly CPI prints, labour market releases are now arguably the most important domestic reports.
Source: Trading View
In August, employment is forecast to rise by 22,000, leaving the unemployment rate at 4.2% on unchanged participation at 67.0%. After a solid run for the Aussie against the dollar and crosses, directional risks now appear skewed towards a weaker outcome, sparking a larger market move.
AUD/USD Calm Before Calamity
Source: TradingView
Looking at AUD/USD on the hourly chart, many of the clean lines will likely be destroyed around the Fed decision. For now, the pair remains in an uptrend, though bullish momentum is waning with RSI (14) and MACD both rolling over. On the downside, .6675, .6653, .6635, .6620, .6596 and .6582 are minor levels to watch, with more significant support at .6550, .6465 and .6419. On the topside, a break of .6690 would bring .6700, .6750 and .6800 into play.
A breach of the latter could see bulls eye a return to the September 2024 swing high of .6944.