Last week, the FOMC made the decision to pause its tightening cycle, keeping rates steady at 5.00-5.25%. The rationale behind this choice is their desire to gather more economic data before making further decisions regarding rate hikes. They are striving to identify the optimal level of policy restraint that can effectively bring inflation down to their 2% target without triggering a severe recession.
Thus far, the economic data in the United States has been positive, especially in the housing sector, which has exhibited considerable strength since the Fed began scaling back its rate hikes back in December 2022. This may have contributed to some USD strength seen lately.
AUDUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that AUDUSD has broke out above the key 0.6781 resistance but got smacked back down from the resistance at the 0.69 handle. The price has now fell into the red 21 moving average where we should find some support and the buyers trying to position for another rally.
AUDUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that since breaking out of the rising channel, AUDUSD just kept on selling off. The moving averages have crossed to the downside indicating a downtrend on this timeframe and with the latest lower low we also have a downward trendline. The sellers should wait for the price to pull back into the trendline to position for more shorts, while the buyers may want to wait for the price to break above the trendline to pile in and target a new high.
AUDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the possible trading setup for the sellers. In fact, at the 0.6741 level we can find a resistance zone from a previous swing low level, the 50% Fibonacci retracement level and the trendline. The sellers should lean on this zone with a defined risk above the trendline and target the 0.6563 support. The buyers, on the other hand, don’t have much to lean on to at the moment, so the best thing they can do is to wait for the price to break above the trendline to position for more upside.
Today we have the US PMIs and it’s likely that we’ll see some USD weakness if the data misses expectations as the market would price out the July hike, and USD strength in case the data beats forecasts due to a more hawkish pricing afterwards.
