AUD/USD, ASX 200 Analysis: Morning Brief - 31st May 2023

Market summary

The Republican House of Representatives are set to vote today on whether to pass the debt-ceiling bill on to the Democratic Senate
Both Biden and McCarty continue to claim they have enough votes, but that doesn’t mean we should not rule out a surprise bump in the road along the way to potentially derail the deal and spark a bout of risk-off for markets (which could send risk assets such as indices, AUD/JPY lower and gold higher)
A bearish outside day formed on the US dollar index to suggest a near-term inflection point at the highs
EUR/USD found support with a bullish engulfing day at the 200-day EMA / 50-week EMA / 20-month EMA
USD/CAD formed a bullish hammer day at the 20-day EMA, AUD/USD formed a bearish engulfing day
Australian building approvals fell -8.1% in April, below 2% expected
Australia’s Treasury Secretary warns that the economy may be entering a period of poor growth, although inflationary pressures are expected to diminish from here
Expectations are for China’s PMIs to contract again, according to a Bloomberg survey (which could potentially weigh on AUD today, if weak enough)
Keep an eye on comments from RAB Governor Lowe who speaks at 09:00 AEDT, as traders try to decipher whether the RBA will hike again or pause at their June meeting
However, the key data point for AU traders is the monthly inflation report at 11:30 AEDT

Events in focus (AEDT):

09:00 - RBA Lowe speaks
09:50 – Japan’s retail sales, industrial production
1100 – New Zealand business confidence
11:30 – Australian inflation, China’s PMI (manufacturing, services and composite from NBS)

ASX 200 at a glance:

Lowest daily range in six weeks
20-day EMA capped as resistance
Price action on the intraday timeframe appears to be corrective
SPI futures point to a slightly lower open of ~0.47%
However, a 3-day bullish reversal formed on the daily chart on Monday (morning star reversal)
Now looking for evidence of a swing low and move to 7300

AUD/USD 1-hour chart:

The Aussie printed a bearish engulfing day near the cycle lows to suggest it wants to break lower and extend its bearish trend. However, we’ve seen a bit of a shakeout around the lows, with a double bottom formed above 0.6500 with elevated volumes, which suggests demand around this level and the potential for a bounce. The most traded price within the sideways range is 0.6540, which could act as a magnet for a move high – at which point we would seek for evidence of a swing high up to the March / April lows for another leg lower.

Asia Data Calendar (AEDT):

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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