AUDUSD TECHS: Approaching Key Short-Term Support

• RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
• RES 3: 0.6688 High Nov 7 ‘24
• RES 2: 0.6603 High Nov 11 ‘24
• RES 1: 0.6595 High Jul 11 and the bull trigger  
• PRICE: 0.6531 @ 17:11 BST Jul 21
• SUP 1: 0.6455 Low Jul 17
• SUP 2: 0.6435 23.6% retracement of the Sep 9 - Jul 11 bull leg   
• SUP 3: 0.6373 Low Jun 23 and a bear trigger  
• SUP 4: 0.6357 Low May 12

The trend set-up in AUDUSD remains bullish. Support at the 50-day EMA, at 0.6490, has been breached, however, the pair has found support just below the average. A clear break of this EMA would highlight a stronger reversal and signal scope for an extension initially towards 0.6435, a Fibonacci retracement. Key short-term resistance has been defined at 0.6595, clearance of this hurdle would resume the uptrend.      

Two weeks after its passage, the Congressional Budget Office (CBO) has estimated that the "One Big Beautiful Bill" will result in a net widening of the deficit over the 2025-34 period of just under $3.4T vs the January 2025 baseline. Outlays are $1.1T lower but revenues are around $4.5T lower. The first table below shows the estimated impact.

• These are close to the CBO's pre-passage estimates, but have been tweaked after some final Senate changes went into the final bill.
• The important caveat is that this deficit expansion is relative to a current law baseline, and the current law was that the 2017 TCJA tax cuts would phase out automatically. Additionally this doesn't include dynamic effects.
• When compared to a "current policy" baseline, which assumed that the TJCA tax cuts didn't expire, the new fiscal bill is estimated to "result in a net decrease in the unified budget deficit totaling $366 billion over the 2025-2034 period, relative to the budget enforcement baseline for consideration in the Senate. That decrease in the deficit is estimated to result from a decrease in direct spending of $1.2 trillion and a decrease in revenues of $849 billion." This is shown in the 2nd table below.
• Even this, though, is misleading given that some tax cuts are set to expire in 5 years, and their extension would lead to a higher overall deficit over the coming decade.
• Note the positive fiscal impulse in the 2026 FY (Oct-Sep), which is then set to tighten over the subsequent years.

• RES 4: 175.43 High Jul 11 ‘24 and a key medium-term resistance  
• RES 3: 174.86 1.764 proj of the Feb 28 - Mar 18 - Apr 7 price swing
• RES 2: 173.43 High Jul 12 ‘24
• RES 1: 173.24 High Jul 15
• PRICE: 172.31 @ 17:10 BST Jul 21
• SUP 1: 171.84  Low Jul 16  
• SUP 2: 170.67 20-day EMA 
• SUP 3: 169.32 Low Jul 3   
• SUP 4: 167.90 50-day EMA   

A bull cycle in EURJPY remains firmly in place and fresh cycle highs last week reinforce current conditions. A price sequence of higher highs and higher lows highlights a dominant uptrend and note that moving average studies are in a bull-mode position. Sights are on 173.43, the Jul 12 ‘24 high. Support to watch lies at 170.67, the 20-day EMA. A move below this average would signal scope for a corrective pullback.