- AUD/USD struggles to find direction following last week’s slump.
- US Dollar Index extends rally to fresh multi-month highs above 98.
- Only data from US on Monday: Dallas Fed Manufacturing Index.
The AUD/USD pair closed every trading day of the previous week in the negative territory and erased more than 100 pips for the week. After inching lower and touching its worst level in more than a month at 0.6902, the pair has gone into a consolidation phase and has been moving in an extremely tight range above the 0.69 handle.
US-China trade talks and FOMC meeting coming up
Investors seem to be refraining from making large bets ahead of this week’s high-level US-China trade negotiations, which could impact antipodean’s market pricing significantly, in Shanghai. Earlier today, China’s Foreign Ministry in a statement reiterated that they hoped the US will fulfil its commitments and create “enabling conditions for upcoming trade talks”.
On the other hand, ahead of this week’s critical FOMC meeting, the selling pressure surrounding major European currencies, especially the British pound, allows the USD to find demand and outperform its rivals. At the moment, the US Dollar Index is at its highest level since late May at 98.13, adding 0.23% on the day and suggesting that the bearish pressure on the pair could gather strength.
Later in the day, the Federal Reserve Bank of Dallas will release its Manufacturing Survey but is unlikely to trigger a sharp reaction.
Markets are expecting the Fed to announce its first rate cut in more than a decade amid the slowdown in the US economic growth and the dismal global economic outlook. However, this move seems to be already priced in investors will be trying to figure out how aggressive Fed will remain with regards to rate cuts in the remainder of the year.
Technical levels to watch for