AUD/USD Forecast: Aussie under pressure after reversal

AUD/USD Current Price: 0.6681

• US Dollar tumbles after FOMC meeting, then trims losses as Wall Street sinks.
• Fed raises rates as expected, offers no clear path to the future.
• AUD/USD retreats sharply, making a dramatic reversal back to 0.6680.
• A weaker US Dollar could open the door again to 0.6700.

 On a volatile session, the AUD/USD peaked at 0.6758 but then reversed sharply, failing to hold above key technical levels. The pair posted a modest daily gain on Fed’s days, ending far from the highs. When it looked ready for more gains, a reversal clouded the outlook for the bulls.

The Federal Reserve (Fed) raised interest rates by 25 basis points as expected. The decision was unanimous. The central bank changed the forward guidance saying that “some additional policy firming may be appropriate,” instead of “ongoing increases in the target range will be appropriate”. Fed Chair Powell said that officials do not see rate cuts for this year. Speaking simultaneously, US Treasury Secretary Janel Yellen said that they are not considering broad increase in deposits insurance. Her comments weighed on stocks, favoring the reversal in Wall Street indices.

The US Dollar tumbled after the meeting and then recovered, particularly against commodity currencies, including the Aussie. No economic data is coming from Australia on Thursday. The focus will remain on how markets digest the FOMC meeting. A key for the AUD/USD is how the stock market continues to react. If sentiment improves, the Aussie has a chance of resuming the upside.

AUD/USD short-term technical outlook

 
The AUD/USD jumped to 0.6758 and then dropped all the way back to 0.6680. The pair failed to hold, not only above 0.6725/30, but also to keep 0.6700. The following hours would be critical for the pair. If the slide continues, the bearish pressure could become intense. Ahead of the Asian session, immediate support is seen at 0.6665. A decline below would expose 0.6630, the last defence until last week’s low of 0.6585.

Technical indicators change dramatically following the retreat from above 0.6750. If the pair remains around current levels, it would confirm bearish signs emerging from the 4-hour chart. On the contrary, if the AUD/USD rebounds back above 0.6700, another test of 0.6730 could be seen. A firm break above 0.6730 would clear the way for 0.6770.

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