Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6380.
- Add a stop-loss at 0.6515.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6480 and a take-profit at 0.6535.
- Add a stop-loss at 0.6385.
The AUD/USD price retreated after the latest Federal Reserve interest rate decision. After peaking at 0.6510 on Wednesday, the pair retreated to a low of 0.6465. It has risen by more than 1.75% from the lowest level in September.
Federal Reserve decision
The Australian dollar eased slightly against the USD after the latest Fed decision. In it, the bank decided to leave interest rates unchanged between 5.25% and 5.50%. The FOMC said that it remained highly attentive to inflation risks.
The most recent data revealed that America’s inflation rose in July and August after dropping for several months. Inflation rose by 3.7% in August after jumping by 3.2% in the previous month.
The challenge for the Fed is that there are still more inflation risks in the market. For example, the price of crude oil has jumped to the highest level in more than 10 months. At the same time, automotive workers have gone on a major strike that could push vehicle prices higher.
A major traffic jam is also happening at the Panama Canal, a route used by most ships bringing goods to the US. This jam will likely lead to higher prices in the long term. Therefore, there is a likelihood that the Fed will deliver at least one more rate hike later this year. The dot plot hinted that rates will peak between 5.5% and 5.75%.
There will be no economic data from Australia on Thursday. Therefore, the AUD/USD pair will be driven by the Fed decision. Also, there will be several crucial economic numbers from the US like existing home sales, initial jobless claims, and the Philadelphia Fed manufacturing index. The Fed will also publish its balance sheet figures.
AUD/USD technical analysis
The AUD/USD pair has been in a slow bullish trend in the past few days. In this period, it has jumped from this month’s low of 0.6381 to a high of 0.6500. The pair has formed an ascending channel and is a few pips above the 50-period moving average. It also retested the upper side of the channel and the highest swing on 1st September.
The Relative Strength Index (RSI), which has been rising, drifted downwards after the Fed decision. The pair will likely resume the downward trend as sellers target the key support at 0.6380.
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