AUD/USD hits 12-day lows as Fed signals 2 more rate hikes in 2018

  • AUD/USD dropped sharply, breaking below 0.7550 as USD strengthened.
  • Fed raised interest rates as expected, signaled two more hikes for the rest of the year.
  • Every FOMC meeting to be followed by press conference since January.

The AUD/USD pair dropped from near 0.7600 to 0.7525 reaching the lowest level since June 1. From the lows rebounded but it was still under 0.7550 with a negative tone.

The slide took place after the Fed raised the Fed Funds rate by 25 basis points as expected. FOMC staff forecasts pointed to two more rate hikes during 2018. The statement contained many changes compared to the previous one.

“Despite the risks presented by trade wars and emerging market difficulties, the Fed appears confident in the outlook and has opted to increase rates by a further 25 basis points. Assuming the economy continues to perform well, and inflation/wage growth continues to pick-up, we expect the Fed to hike a further two times in the second half of this year”, said analysts at ING.

The greenback gained momentum across the board, even against Emerging Market currencies supported by the FOMC outlook, projections and the changes in the statement. The US Dollar was holding to gains after the initial testimony of Jerome Powell.

After Powell’s press conference the next key event for AUD/USD will be the Australian jobs report. A positive change in employment of 18K is expected.

AUD/USD Levels to watch

The pair heads for the first close under the 20-day moving average since late May. It is testing an uptrend line from May lows located around 0.7520/30: a consolidation below could open the door to more losses. Support levels might be located at 0.7500 and 0.7470. To the upside, resistance could be seen at 0.7555 (Asian session low), 0.7580 and 0.7605/10 (Jun 13 high).


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