Yesterday brought some intriguing developments in the financial world, especially concerning the US Producer Price Index (PPI). While the report showed higher-than-expected figures, the finer details that influence the Core Personal Consumption Expenditures (PCE) index were notably muted. This particular index holds significant weight with the Federal Reserve, and the softer details helped calm early forecasts down to a more manageable level. As it stands, projections for the Core PCE on a year-over-year basis have been adjusted to 2.6%, down from a previous 2.8%. This is promising news for the Fed.
In response, the US Dollar experienced a broad decline. This downward momentum picked up considerable speed later in the day, coinciding with the resolution of the Trump tariff saga. The announcement of reciprocal tariffs by the US President, slated to potentially take effect in April, had a tone far from aggressive. It seemed more like the opening move in a negotiation intended to level the playing field for all parties involved.
Turning our attention to Australia, the narrative has largely revolved around US Dollar softness. With diminishing concerns over tariffs, other major currencies have been given a chance to strengthen against the greenback.
On the economic data front, Australia’s fourth-quarter Consumer Price Index (CPI) report underperformed across the board. The underlying inflation metrics eased further, comfortably positioning themselves within the Reserve Bank of Australia (RBA)’s target range on a six-month annualized basis.
The RBA has recently signaled a more dovish stance in their latest policy decision, moving closer to initiating their first rate cut. Current market conditions suggest an 86% probability of a 25 basis point cut in February, with expectations of a total 75 basis points reduction by the end of the year.
Analyzing the AUDUSD on a daily timeframe, we see it approaching the key resistance zone around the 0.6330 mark. Sellers are likely to take action here, setting up a defined risk strategy above the resistance, aiming for a possible drop to the 0.6170 level. Buyers, however, are looking for a breakthrough, hoping to push the bullish movement toward the 0.65 threshold.
Switching to the 4-hour chart, we notice an ascending trendline that’s currently dictating bullish momentum. A pullback to this line could see buyers positioning themselves for a break above resistance, with clear risk defined below the trendline. Sellers, by contrast, will be hoping for the price to drop below this point, increasing their positions toward the 0.6170 level.
Finally, on the 1-hour chart, the situation is relatively straightforward—sellers are gearing up around the current levels, while buyers are ready to support a breakout, anticipating an extension of the upward trend. The red lines illustrate today’s average daily range.
As we wrap up the week, all eyes are on the forthcoming US Retail Sales report, which is poised to impact the markets further.
