- AUD/USD prints a fresh three-week low at 0.7262.
- Downbeat market sentiment boosts the demand for US dollars.
- AUD/USD awaits the FOMC meeting to resume its direction.
During the European session, the AUD/USD reached a peak of 0.7321. However, as market sentiment deteriorated and American traders got to their desks, the AUD/USD dipped below 0.7300, pushing the pair to a three-week low at 0.7262. The AUD/USD is trading at 0.7284 at the time of writing, down 0.05% on the day.
US stocks fall while the greenback rises, underpinned by higher bond yields
In the New York session, US stock indexes are posting losses between 0.32% and 1.21%. The US Dollar Index is on the right foot, rising 0.41% on the day, currently at 93.24, underpinned by higher yields. The 10-year benchmark rate is at 1.368%, up to three basis points.
In the US economic docket, the Consumer Sentiment of the University of Michigan was released. The sentiment improved to 71.0 in September but remained below the 72.2 expected. The Delta strain has dampened the consumer sentiment, lowering the economic forecasts for the third quarter as economic activity slowed down.
The week ahead: FOMC Meeting and RBA Minutes
The Federal Open Market Committee will hold its September meeting. A lousy employment report and moderate inflationary pressures could delay bond taper announcement until November’s meeting. Contrarily, rising PPI and a stellar Retail Sales report could potentially prompt the Fed to take action at the following week’s meeting.
Meanwhile, the Reserve Bank of Australia will reveal the minutes of their last meeting on September 21.
AUD/USD Price Forecast: Technical outlook
The AUD/USD pair is trading well below its main daily moving averages in the daily chart, suggesting that sellers are in charge. The first support level would be 0.7200. In case of a break below the latter, the next demand area would be the 2021 low at 0.7100. A breach of that level could motivate sellers to push the price towards the psychological 0.7000.
On the other hand, buyers would need to push the price towards the 50-day moving average at 0.7342 to reclaim control.
The Relative Strength Index is at 41.18, heading lower, supporting the bearish bias.
KEY TECHNICAL LEVELS TO WATCH
- EUR/USD reaches a three-week low at 1.2724.
- Market sentiment weighs on the EUR/USD as flows flew to the safe-haven USD.
- The US Dollar Index rises above 93.00 despite weak US consumer sentiment data.
EUR/USD keeps sliding for the second day in a row, exchanging hands at 1.1728 down 0.30% on the day at the time of writing. After a stellar US Retail Sales report on Thursday, the EUR/USD pair is trading at three-week lows, on broad US dollar strength.
The US Dollar Index (DXY) is at three-week highs
The market mood is in risk-off mode, with US stock indices sliding between 0.26% and 1.19% and bond yields rising. The US 10-year benchmark rate is at 1.368%, up almost four basis points on Friday, underpinning the greenback. The US Dollar Index is up 0.33%, sitting at 93.17.
During the European session, the Eurozone Core Consumer Price Index (YoY) rose by 1.6%, in line with expectations. Meanwhile, the Core CPI for August (MoM) edged higher 0.3% as foreseen.
Across the pond, the US University of Michigan Consumer Sentiment increased slightly to 71 in September versus 70.3 in the previous month, although it was worse than the 72.2 expected. The report attributed the declines to higher prices, as consumers expect the inflation rate to rise 4.7%, matching the highest since 2008.
Investors’ focus turns to next week events. The Federal Open Market Committee will discuss monetary policy issues, being the QE reduction the spotlight of the statement.
Key technical levels to watch
- USD/CAD prints a new weekly high at 1.2763.
- The market sentiment remains downbeat, with the S&P 500 trading below the 50-DMA.
- WTI is falling in the session by 1.27%, dragging the loonie with it.
- Federal Election in Canada to take place on September 20.
USD/CAD is gaining ground in the session, up 0.45%, trading at 1.2739 at the time of writing. The market sentiment remains downbeat, as US stock indexes post losses caused by expiring options on Friday. The S&P 500 has broken below the 50-day moving average, risking the “buying the dip” narrative.
Additionally, oil prices that strongly correlate with the Canadian dollar are falling for the second straight day, with the WTI trading at $72.12, down 0.55%.
US Consumer Sentiment worse than expected
In the US economic docket, the University of Michigan Consumer Sentiment edged up to 71.0, still worse than the 72.2 expected by economists. The USD/CAD reaction to that headline was muted, while investors’ focus turned to next week’s Federal Open Market Committee meeting on September 21-22.
Meanwhile, in Canada, the Federal Election to take place on September 20 could spur some choppiness in the USD/CAD while the market awaits its results.
USD/CAD Price Forecast: Technical outlook
In the daily chart, the USD/CAD is trading at 1.2728. Even though the pair reached a weekly high, it unsuccessfully tested the September 8 high at 1.2762, retracing almost 40 pips afterwards. The first resistance on the upside would be the mentioned high at 1.2762. In case of a sustained break of that level, the following supply area, would be 1.2800.
On the flip side, failure at 1.2762 could pave the way for further losses. The first support would be 1.2700. In case of a break of that level, the USD/CAD could tumble to 1.2600.
The Relative Strength Index is at 58.34, aiming higher, supporting the uptrend, but macroeconomic developments should keep bulls cautious.
Technical levels to watch
Previewing next week’s FOMC policy meeting, TD Securities analysts said that they expect policymakers to note that they are “almost ready to taper.”
“We expect a formal announcement in December, not November, but will reassess after the meeting. While median 2022-23 dot-plot projections will likely be unchanged, the math makes any changes more likely to be up than down. Median inflation/growth projections for 2021 will have to be raised/cut.”
“While we think the FX reaction should be contained, the balance of risks leans towards a more hawkish outcome especially given the low bar to shift the median dot-plot higher. From a risk/reward perspective, that favors some modest USD upside and a challenge for the traditional funders.”