2022 September

The US Dollar Index surged nearly 6.6% off the September lows with DXY stretching to multi-yearly highs this week. An outside-day reversal off uptrend resistance yesterday may be signaling the threat for topside exhaustion here and while the broader outlook remains constructive, immediate advance may be vulnerable in the day ahead. These are the updated technical targets and invalidation levels that matter on the US Dollar Index weekly price chart heading into the October / Q4 open. Review my latest Strategy Webinar for an in-depth breakdown of this DXY technical setup and more.
— Written by Michael Boutros, Technical Strategist with DailyFX

CONSUMER CONFIDENCE KEY POINTS:
U.S. consumer confidence rises to 108.00 in September from 103.6 in August, topping consensus expectations calling for an advance to 104.6
A sharp increase in the present situation and the expectations indicator can be attributed to the recovery
U.S. dollar trims losses after the survey results cross the wires
Most Read: S&P 500, Dow Jones, Nasdaq 100 Outlook – Bounce May Unfold, but Be Short-lived

A popular gauge of U.S. consumer attitudes extended its recovery this month and climbed to its best level since April, as falling gasoline prices, coupled with strength in the labor market, served to offset concerns about the slowdown and persistently high inflation in some areas of the economy.

According to the Conference Board, consumer confidence in September rose to 108.00 from 103.02, beating expectations for an advance to 104.06. While the gain is not significantly large, it is still a step in the right direction and represents a positive sign for future consumption, the main driver of the U.S. economic activity.
Delving deeper into today’s numbers, the present situation index, based on the current business and labor market outlook, jumped to 149.6 from 145.4 on perceptions that hiring conditions are still healthy. This strong gain is consistent with stabilizing activity, a scenario that reduces the likelihood of an imminent downturn.

Elsewhere, the expectations index, which tracks short-term prospects for income, the business environment, and the jobs market surged to 80.3 from 70.1, exceeding the 80.00 level that is indicative of improved growth prospects.

The U.S. dollar, as measured by the DXY index, trimmed most of its early session losses to trade around 114.05 after the survey results were released, as brightening sentiment among Americans bodes well for spending in the final months of 2022, which could add to inflationary pressures and prompt the Fed to continue aggressively raising interest rates.

With the American consumer holding up well despite sky-high inflation and tightening financial conditions, the U.S. central bank will have to slam on the breaks even harder to bring about the kind of demand destruction needed to knock inflation down and force it back to the 2.0% target. This reduces the probability of a monetary policy pivot in 2023, a situation that will bias U.S. Treasury yields to the upside. In this environment, the U.S. dollar is likely to retain strong momentum in the FX market, paving the way for the DXY index to keep conquering fresh multi-decade highs in the near-term.
—Written by Diego Colman, Market Strategist for DailyFX

We are closed Thursday 22 September 2022 for the National Day of Mourning for Her Majesty The Queen and Friday 23 September for the AFL Grand Final Public Holiday. We will re-open at 8.30am on Monday 26 September.

AUSTRALIAN DOLLAR TECHNICAL PRICE OUTLOOK: AUD/USD WEEKLY TRADE LEVELS
Australian Dollar technical trade level update – Weekly Chart
AUD/USD plunges back towards downtrend support US post-CPI release
Aussie resistance 6930s, 6991-7016 (key) 7139- Support 6621/70 (critical), 6461, 6196

The Australian Dollar plunged more than 2.2% against the US Dollar on the heels of a hotter than expected US inflation read with AUD/USD now approaching multi-year downtrend support. We’re looking for possible price inflection here with a break lower threatening an even sharper Aussie sell-off. These are the updated targets and invalidation levels that matter on the AUD/USD weekly technical chart.

Notes: In our July, AUD/USD Technical Forecast we highlighted that that AUD/USD had rebounded off the lower parallel of this multi-year descending pitchfork formation – that recovery failed into the median-line / August 2021 low-week close at 7138 last month before reversing sharply with the decline now once again approaching the lower parallel. It’s decision time for the Aussie bears.

A break below this slope exposes a key support pivot at 6621/70- a region defined by the 100% extension of the 2021 decline , the 2008 low-week close and the 2019 low. Ultimately, a close below this threshold would be needed to fuel the next leg lower in price towards the 61.8% Fibonacci retracement of the entire 2020 rally at 6461. Initial weekly resistance is eyed at the 25% parallel (currently ~6930s) backed by the November 2020 low / 2020 yearly open at 6991-7016. Broader bearish invalidation now lowered to the 52-week moving average which converges on the median-line around 7139.

Bottom line: The Australian Dollar is approaching multi-year downtrend support and we’re looking for a reaction in price on a stretch towards the lower parallel – watch the weekly close. From a trading standpoint, rallies should be capped by the monthly open at 6840 IF price is indeed heading lower with a close below 6621 needed to fuel the next major-leg lower in price. I’ll publish an updated Australian Dollar Price Outlook once we get further clarity on the short-term AUD/USD technical trade levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

A summary of IG Client Sentiment shows traders are net-long AUD/USD – the ratio stands at +2.43 (70.85% of traders are long) – typically bearish reading
Long positions are 2.41% higher than yesterday and 18.31% lower from last week
Short positions are26.43% lower than yesterday and 19.54% lower from last week
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUD/USD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger AUD/USD-bearish contrarian trading bias from a sentiment standpoint.

— Written by Michael Boutros, Technical Strategist with DailyFX