Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.7100.
- Add a stop-loss at 0.7270.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7240 and a take-profit at 0.7350.
- Add a stop-loss at 0.7150.
The AUD/USD pair held steady on Wednesday morning as the market reflected on the latest RBA minutes and the upcoming Federal Reserve decision. It is trading at 0.7200, which was slightly above this week’s low of 0.7175.
Fed Decision and RBA Minutes
The RBA published minutes of the latest meeting on Tuesday morning. The minutes showed that the bank’s officials are still concerned about the impact of the ongoing crisis in Ukraine.
They expect that it will push consumer and producer prices significantly high, which could have an impact on the economy. Still, the members were concerned about hiking interest rates and hinted that they will only hike when real inflation is sufficiently above 2 to 3%.
The pair is also reacting to the ongoing Covid wave in China. In the past few days, many Chinese cities have been announcing a surge in the number of cases in the country. As a result, they have announced lockdowns affecting over 51 million people. This is an important thing for Australia because of the vast resources it sells to China.
The biggest catalyst for the AUD/USD pair on Wednesday will be the interest rate decision by the Federal Reserve. Based on the past statement by Jerome Powell, analysts expect that the bank will deliver a 0.25% interest rate hike.
Still, some economists expect that the bank will hike rates by about 0.50% because of the ongoing inflationary trends. For example, data published last week showed that the headline consumer price index (CPI) rose to 7.9% in February. And on Tuesday, data revealed that the producer price index remains at elevated levels.
In addition to the initial rate hike, the pair will react to the dot plot, which will provide hints about the number of rate hikes expected this year.
AUD/USD Forecast
The AUD/USD pair has been in a narrow range in the past two days. It is trading at 0.7200, which is about 3.30% below the highest level this year. On the four-hour chart, the pair has moved below the key support level of 0.7315, which was the highest level on January 13th.
The pair has moved below the 25-day and 50-day moving averages while the MACD indicator has moved below the neutral line. Therefore, due to the bearish flag pattern, there is a likelihood that the pair will continue falling in the near term. This will likely see it drop to the key support at 0.7100.
