AUD/USD bulls seek a break of 0.6925 for 0.6950 target area

AUD/USD is consolidated at the start of the Asian day following some back and forth at the start of the week. The Aussie is trading at 0.6922 and will be dependent on the trajectory of the greenback in the absence of domestic data this week other than Retail Sales tomorrow. 

''While consumer sentiment has slumped given rising inflation and a lower confidence around the economic outlook, household balance sheets are in good shape,'' analysts at TD Securities said in respect of today's data. ''Further, a strong labour market should keep household spending elevated. A strong retail beat will boost the case for another aggressive move by the RBA in July after their outsized 50bps hike.''

Meanwhile, the greenback has been a head-turner. Speculators’ net long USD index positions ticked a little higher having surged to their highest levels since March 2017 the previous week as the market prepared for this month’s 75 bp rate hike from the Fed. However, the spot market, as per the DXY, has been testing below 104 which opens the risk of a deeper move into 103. 

''Speculation is beginning to emerge that the market may have over-estimated the extent to which the Fed may have to hike rates. This could soften net USD positions in forthcoming data,'' analysts at Rabobank argued. 

DXY H1 chart

The price of DXY has been breaking structure (BoS) to the downside and the latest formation could be the makings of an M-formation's resistance and a buy-to-sell scenario from the neckline to the price imbalance (PI) and order block (OB) below. In turn, this would be expected to support AUD in a bullish correction out of consolidation for the sessions ahead:

Zooming in:

The short-term schematic is bullish on a break of the 0.6925 resistance for a run to 0.6950.