Bearish View
Sell the AUD/USD and set a take-profit at 0.7150.
Add a stop-loss at 0.7280.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 0.7250 and a take-profit at 0.7350.
Add a stop-loss at 0.7200.
The AUD/USD resumed its bearish move in the overnight session as Tuesday’s rally faded. The pair declined to 0.7220, which was slightly below Tuesday’s high of 0.7285.
Fed in Focus
The AUD/USD staged a cautious rebound on Tuesday after the Reserve Bank of Australia (RBA) published the minutes of its September meeting. During the meeting, the bank left its policy tools unchanged as it observed the impacts of the new Delta variant wave.
The minutes also showed that the bank expressed concerns about the Chinese economy. It pointed to the recent decisions by Beijing to cap steel production and to boost regulations in some under-regulated areas like education and technology.
Notably, the bank warned about the property market, where investors are concerned about the risks brought about by Evergrande and other overleveraged real estate companies.
The AUD/USD will next react to the latest Federal Reserve decision. The bank, which started its two-day meeting on Tuesday, will publish its decision during the American session.
This decision comes at a time when the American economy is doing relatively well as evidenced by the recent data. For example, on Tuesday, housing numbers revealed that housing starts and building permits jumped in August. At the same time, inflation remains elevated while retail sales have rebounded. The unemployment rate has declined also.
Therefore, analysts expect a relatively hawkish Federal Reserve. While it will leave its tools in place, the bank will likely provide details about when it will start tapering its asset purchases. The dot plot will also show when the bank intends to hike interest rates.
The AUD/USD will also be sensitive to any new developments in China where the country will move from a holiday.
AUD/USD Forecast
The AUD/USD pair declined during the overnight session. It fell to 0.7235, which is about 3.25% below the current level. Along the way, it has moved below the 25-day and 50-day exponential moving averages, signalling that bears are still in control.
The price is also slightly below the upper side of the descending channel shown in black. It is also below the Ichimoku cloud. Therefore, the pair will likely maintain a bearish trend as investors target the key support at 0.7200. This view will be invalidated if the price moves above the key resistance at 0.7280.
