- AUD/USD better bid on positive risk sentiment.
- Evergrande risks are abating and markets no await the Fed decision.
- 0.7280 and 0.7200 are the key levels to watch for.
Risk related currencies, such as AUD, are firmer mid-week following news that Chinese property giant Evergrande said it would make an upcoming yuan bond coupon payment.
At the same time, today's Federal Reserve meeting coming-up has anchored the US dollar. At the time of writing, AUD/USD is 0.4% higher at 0.7260. The pair has climbed from a low of 0.7224 to a high of 0.7268 so far on the day.
Evergrande risk abates
China arrived back from a two-day holiday on Wednesday and its return came with some positive news which lifted spirits. Firstly, The People's Bank of China, the PBoC, injected cash into the banking system, temporarily soothing fears of imminent contagion from the debt-laden property developer Evergrande.
The PBoC injected 90 billion yuan into the banking system. This was signalling support for markets and while there are questions over whether the government would bail out Evergrande, investors are taking some assurance that it will indirectly provide support with such measures.
''It’s still unclear how officials will resolve the situation, but we stand firmly by our call for a managed debt restructuring or some sort of official unwind program,'' analysts at Brown Brothers Harriman said.
China Evergrande agreed to settle interest payments on a domestic bond on Wednesday. Evergrande is scrambling to avoid defaulting on a number of bonds with payments due this week and $47.5 million dollar-bond interest payments that are due next week also. Markets remain cautious.
Nevertheless, the Shanghai Composite index closed up 0.4% on Wednesday on the statement in which Evergrande declared the issue relating to its next interest payment due Thursday "resolved." US stocks have also traded higher in midday trade on Wednesday as the concerns eased.
The Dow Jones Industrial Average rose 1.14% with S&P 500 up by 1.06% and Nasdaq higher by 0.88%. All sectors are in the green with energy leading, followed by financials. AUD/USD is highly correlated to the performance of the stock market, so it too is elevated ahead of the Fed at the top of the hour.
It is Fed day
The two-day FOMC meeting ends with a decision on the Fed's interest rate this afternoon. The US dollar is little changed ahead of the decision but has been anchored near 93.20 as measured by the DXY index. While no changes to the policy are expected, new macro forecasts and Dot Plots will be released today and investors will be on the lookout for some modest tweaks to the forecasts.
''According to the Fed’s June projections, it will have met its dual mandate by the end of 2023 and supports the view that rate hikes will begin sometime that year,'' analysts at Brown Brothers Harriman said. ''Of note,'' the analysts added, ''2024 will be added to the forecast horizon today and will be another crucial part of the Fed’s forward guidance.''
Watch live, Fed's chair Powell
AUD/USD technical analysis
AUD/USD is on track for the 50% mean reversion target near 0.7280. On the downside, a test of 0.7200 is eyed as being the -272% Fibonacci retracement of the 4-hour correction o the bearish impulse:
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
USD/JPY holds above 155.50 ahead of BoJ policy announcement
USD/JPY is trading tightly above 155.50, off multi-year highs ahead of the BoJ policy announcement. The Yen draws support from higher Japanese bond yields even as the Tokyo CPI inflation cooled more than expected.
AUD/USD extends gains toward 0.6550 after Australian PPI data
AUD/USD is extending gains toward 0.6550 in Asian trading on Friday. The pair capitalizes on an annual increase in Australian PPI data. Meanwhile, a softer US Dollar and improving market mood also underpin the Aussie ahead of the US PCE inflation data.
Gold price keeps its range around $2,330, awaits US PCE data
Gold price is consolidating Thursday's rebound early Friday. Gold price jumped after US GDP figures for the first quarter of 2024 missed estimates, increasing speculation that the Fed could lower borrowing costs. Focus shifts to US PCE inflation on Friday.
Stripe looks to bring back crypto payments as stablecoin market cap hits all-time high
Stripe announced on Thursday that it would add support for USDC stablecoin, as the stablecoin market exploded in March, according to reports by Cryptocompare.
Bank of Japan expected to keep interest rates on hold after landmark hike
The Bank of Japan is set to leave its short-term rate target unchanged in the range between 0% and 0.1% on Friday, following the conclusion of its two-day monetary policy review meeting for April. The BoJ will announce its decision on Friday at around 3:00 GMT.