FUNDAMENTAL
OVERVIEW

USD:

The US dollar started the week on a positive note following rising tensions
in the Strait of Hormuz. Yesterday, we got reports and denials about Iran
firing on US ships in the Strait which gave the greenback a boost.

Trump said the US sank 6 Iranian fast boats while Iran denied it. Iran also
launched a surprise attack against the UAE oil route that bypasses the Strait
of Hormuz in Fujairah. This latest escalation is likely to keep the US dollar
supported as the risk sentiment stays more on the defensive.

Trump has played things down for now, but the situation could worsen
quickly. Overall, we are now in a consolidation phase as we await the next key
development in this US-Iran stalemate.

The Fed is slowly abandoning the easing bias amid resilient US data and
elevated energy prices. The reopening of the Strait could weigh on the
greenback in the short-term as oil prices will likely crater and rate cut bets
will increase.

After that though, the focus will quickly turn back to the Fed and the
economic data. With the end of the war, the increase in economic activity could
keep inflation higher for longer and eventually even require rate hikes to
bring it sustainably back to the 2% target that the Fed has been missing since
2021.

AUD:

On the AUD side, the RBA
raised the Cash Rate to 4.35% as widely expected today and signalled a
pause. In fact, the central bank added in the statement the key passage “having
raised the cash rate three times, monetary policy is well placed to respond to developments,
and the Board is focused on its mandate to deliver price stability and full
employment”.

The RBA has also revised
its forecasts for the Cash Rate by matching the market expectations of two more
rate hikes by year-end. Governor Bullock doubled down on the more neutral tone
as she stated that “the cash rate level is now a bit restrictive” and “that
gives us space to see how the conflict plays out”. Finally, she added that “with
this rate hike, we have space to sit and see what happens”.

The market pared back some of the
hawkish bets and it now see the next rate hike coming in September at the
earliest.

AUDUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily chart, we can
see that AUDUSD is consolidating around the
cycle highs as the US-Iran stalemate keeps the price action more rangebound.
From a risk management perspective, the buyers would have a much better risk to
reward setup around the major trendline to position for a rally into new highs.
The sellers, on the other hand, will need a break lower to open the door for
new lows.

AUDUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour chart, we can
see more clearly the consolidation phase highlighted by the blue box. The
market participants will likely continue to play this range by buying at
support and selling at resistance until we get a breakout on either side.

AUDUSD TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour chart, there’s
not much else we can add here as the sellers will have a better risk to reward
setup around the resistance, while the buyers will have it around the support. The
red lines define average daily range for today.

UPCOMING CATALYSTS

Today we get the US ISM Services PMI and the US Job Openings data. Tomorrow,
we have the US ADP report. On Thursday, we get the latest US Jobless Claims
figures. On Friday, we conclude the week with the US NFP report and University
of Michigan Consumer Sentiment survey.