- AUD/USD maintains a positive tone on a soft US Dollar.
- Money markets expect a 25 bps rate hike by the Fed on Wednesday.
- AUD/USD Price Analysis: Daily close above 0.6714 would add upward pressure; otherwise, it could fall to 0.6600.
AUD/USD prints a leg-up above the 0.6700 figure, helped by an improvement in market sentiment. Investors shrugged off banking crisis contagion woes after UBS decided to buy Credit Suisse, perceived by traders as an excuse to buy riskier assets. That, alongside speculations for less aggressive monetary policies amongst central banks, weighed on the US Dollar. At the time of writing, the AUD/USD exchanges hands at 0.6715.
AUD/USD to hover around 0.6700 ahead of the FOMC’s meeting
The financial markets’ mood remains upbeat after the banking crisis saga and appears to be calm. However, in the United States (US), First Republic Bank stock plunged after another credit downgrade. The US Federal Reserve (Fed) would begin its two-day monetary policy meeting on Tuesday, with money markets estimating a 70% chance of a 25 basis point rate hike by the Fed. That would lift the Federal Funds Rate (FFR) to the 4.75% - 5.00% threshold. After the Fed’s decision, Chair Powell will hit the stand.
The latest round of US economic data witnessed Industrial Production shrinking and the University of Michigan (UoM) Consumer Sentiment deteriorating. However, Americans expected inflation to fall, with 1-year expectations estimated to finish at 3.8% from 4.1%, while for 5-yeard, it dropped to 2.8% from 2.9%.
The US Dollar Index, a gauge of the bucks’ value against a basket of peers, continues to extend its losses, down 0.51%, at 103.343, a tailwind for the AUD/USD.
On the Australian front, the lack of data left traders adrift to risk appetite. Even though China’s reopening should bolster the Australian Dollar (AUD), the latest rate hike by the Reserve Bank of Australia (RBA), was perceived as a dovish one, which would exert downward pressure on the AUD/USD.
AUD/USD Technical analysis
After dropping below the 0.6600 figure, the AUD/USD reclaimed the 0.6700 figure. Nevertheless, the 20-day Exponential Moving Average (EMA) at 0.6713 is difficult to surpass, as the AUD/USD is forming a dragonfly doji. If the AUD/USD registers a daily close above the 20-day EMA, that will set the pair to test the intersection of the 50/100-day EMAs, each at 0.6779-85, respectively. Once cleared, the 0.6800 could be tested. Otherwise, the AUD/USD could extend its losses below 0.6700 toward the 0.6600 figure.
What to watch?
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