Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6750.
- Add a stop-loss at 0.6925.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6885 and a take-profit at 0.7025.
- Add a stop-loss at 0.6800.
The AUD/USD drifted downwards on Wednesday morning as the US dollar index maintained its comeback. It declined to the psychologically important level of 0.6850, which was slightly lower than the year-to-date high of 0.6926.
Fed minutes ahead
The RBA published its minutes for this month’s meeting on Tuesday and maintained its hawkish view of the economy. The minutes showed that the committee is still concerned about inflation. As such, they vowed that they will continue hiking interest rates in the coming meetings. Analysts are penciling-in three more hikes this year.
The next key catalyst for the AUD/USD pair will be the upcoming Fed minutes scheduled for later today (Wednesday). These minutes are usually more detailed than the initial Fed statement. They also shed light on the deliberations made by the committee members.
In its first meeting of the year, the Fed decided to hike rates by 0.25%, the smallest increase in seven meetings. It also pointed to more rate hikes. In separate reports, analysts at Bank of America, Goldman Sachs, and Citigroup pointed to rate increases through June.
Therefore, hawkish Fed minutes will validate the recent dollar strength and push the pair much lower in the coming days. However, signs that more rate-setters are uncomfortable with more hikes will push it higher.
AUD/USD forecast (daily chart)
The Australian dollar rose to a multi-month high of 0.7153 in February. This price was a few points above the 61.8% Fibonacci Retracement point. It then resumed the bearish trend and moved below the 50% retracement point. The pair has moved into the Ichimoku cloud and crossed the 50-period moving average.
Most importantly, it seems like it has formed an inverted head and shoulders pattern, with the left shoulder being at 0.6685. Therefore, the pair will likely continue falling as sellers target the right shoulder, which will fall at 0.6685.
AUD/USD prediction (4H chart)
The AUD/USD pair has been in a bearish trend in the past few days after the bulls failed to push it above the resistance at 0.7030. On the 4H chart, it has moved below the Ichimoku cloud and the 50-period moving average. It is also approaching the 61.8% Fibonacci Retracement level. The MACD remains below the neutral point.
Therefore, like in the daily chart, the pair will likely have a bearish breakout after the FOMC minutes, with the initial support being at 0.6800 followed by 0.6750.
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