AUD/USD bulls back off from daily resistance to critical hourly support
|- AUD/USD is testing the bull's commitments at hourly support.
- Aussie jobs data and US CPI will be the focus of the calendar this week.
At the time of writing, AUD/USD is down 0.26% after falling from the day's highs of 0.7495 to a low of 0.7448.
The US dollar has taken back control of the FX board due to concerns about the pandemic. Global leaders, such as the UK's Boris Johnson, have warned that ''this pandemic is not over,'' and investors are erring on the side of caution.
'While the main suite of COVID vaccines is still highly effective against the Delta variant in terms of preventing serious disease, concerns are rising that a virus surge is possible.
''The situation is likely to reduce enthusiasm for both business and leisure travel to other Australian states also, as the risk of getting stuck is patently real,'' analysts at ANZ Bank said.
Meanwhile, on the economic calendar, the domestic focus is on the Employment Rate.
Analysts at TD Securities said that it likely fell in June due to the lockdown in Victoria, with a decline in overall payrolls (-0.6% m/m) between the Jun LFS survey period and the May LFS period.
''On participation rate, we expect it to edge up to 66.3% (last:66.2%) as labour demand remains robust. We expect an uptick in the unemployment rate (u/e rate) to 5.4% from 5.1% previously.''
More broadly, there is an underbelly of hypersensitivity to any talk of early tapering in the US.
USD strength has correlated with movements in US Treasuries as of late. The last time the yield of the 10-year US Treasury fell below 1.3%, the USD surged.
For that reason, the US inflation data on Tuesday will be closely watched ahead of testimony by Federal Reserve Chair Jerome Powell on Wednesday and Thursday.
''We once again advise against extrapolating, consistent with Fed officials citing "transitory" factors, but another surge in used vehicle prices, along with reopening-related gains in airfares and hotel rates, likely led to another large rise in the CPI,'' analysts at TD Securities said.
''In contrast, Retail Sales were probably close to flat; they have slowed since their stimulus-powered 11.3% MoM surge in March.''
As for positioning, positions in the USD index surged from a slight net short to a decent net long last week.
Meanwhile, net AUD short positions rose to their highest levels since June 2020 as the Reserve Bank of Australia has maintained a dovish tone.
AUD/USD technical analysis
From a daily perspective, the price is at a critical juncture and it can go one way or the other at this point.
However, given the bearish bias, a break of support would be expected to result in a significant downside extension.
From an hourly perspective, the bears are testing the bullish commitment at an important support structure as follows:
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