- The Aussie's Fed-fueled rally ends prematurely, and continues lower against the USD.
- A lack of macro data leaves the pair exposed to broader market sentiment.
The AUD/USD is trading on the low side in the overnight session, testing just beneath the 0.7700 handle.
The Aussie has given up almost all of Wednesday's gains and is back near three-month lows. The Dollar sell-off spurred on by the Fed's rate hike has promptly evaporated as quickly as it started, and the widening interest rate differential between the US Fed and the Reserve Bank of Australia (RBA) is set to take a toll on the AUD in the long-term.
Interest rates to punish the Aussie
Following the Fed's rate hike, the USD's interest rate is now higher than the AUD's for the first time since 2001. The RBA beginning to walk back their future growth projections with RBA Governor Phillip Lowe striking the 3.0% target from the central bank's last policy meeting, and replacing it with "higher than 2017", which clocked in at 2.5%. That small change leaves the RBA looking down the barrel of suppressed interest rates until well into 2019, while the Fed is gearing up for multiple hikes in the coming year. As the rate differential continues to widen the Aussie can expect to continue lower against the Greenback.
With little data left on the docket for the week, the AUD/USD pair heads into Friday's session being led around by market sentiment.
AUD/USD Technicals
As FXStreet's Valeria Bednarik explained earlier today about the AUD/USD's technical stance, "From a technical point of view, the pair is at risk of resuming its decline, as in the 4 hours chart, the price is hovering around a modestly bullish 20 SMA, while technical indicators hover around their mid-lines, lacking clear directional strength. Wednesday's low at 0.7670 is now a key support, with a break below it signaling a steeper decline for this Friday."
Support levels: 0.7700 0.7670 0.7625
Resistance levels: 0.7740 0.7785 0.7410
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
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.