This week, the Federal Reserve appeared slightly more hawkish than
expected. They decided to maintain interest rates at 5.00-5.25% without any
changes, but they increased the projected terminal rate in the Dot Plot by 50
basis points. The FOMC chose to pause and gather more economic data before
making a decision on a potential rate hike in July. Their caution is supported
by the weaker details found in the latest NFP report, the ISM Services PMI report, and the CPI report, although core inflation remains sticky
at high levels.
Fed Chair Powell mentioned
that the July meeting is “live” but refrained from making any definite
commitments. When the Dot Plot was released, the market quickly bid the US
Dollar, but the value returned to its original levels once Powell’s press
conference began. Overall, this demonstrates that the Federal Reserve is
prepared to take further action to lower inflation, but their decisions rely on
the economic data. Yesterday, the number of US Jobless Claims once again significantly missed
expectations, indicating a potential weakening of the labour market.
AUDUSD Technical Analysis –
Daily Timeframe
On the
daily chart, we can see that once the AUDUSD pair broke out of the key resistance at
0.6781 it took off helped by the weaker US Jobless Claims yesterday. The price
may be overstretched though as depicted by the distance from the blue 8 moving average. In such
instances, we can generally see some consolidation or a pullback to the moving
average before the next move.
AUDUSD Technical Analysis –
4 hour Timeframe
On the 4 hour chart, we can see how the price has
been neatly trending upwards within a rising channel with the red 21 moving
average acting as dynamic support. Now that the price has tapped into the upper
bound of the channel, we might expect a pullback unless today’s US data misses
expectations.
AUDUSD Technical Analysis –
1 hour Timeframe
On the 1 hour chart, we can see that from
a risk management perspective, the buyers would have a better risk to reward
setup if they waited for the price to pull back into the lower bound of the
channel where we can find confluence of a
previous swing high support, the 50% Fibonacci
retracement level, the 4-hour 21 moving average and
the daily 8 moving average. The sellers, on the other hand, may either try to
short at these levels into the lower bound of the channel or wait for the price
to break below the 0.6781 resistance turned
support to extend an eventual selloff into the 0.6563 level.
Today, the market will be paying close
attention to the University of Michigan consumer sentiment report. Last time,
the market had a strong reaction to it because long-term expectations for
inflation showed a significant increase, going up from 3.0% to 3.2%. However,
later on, that number was adjusted to 3.1%. Therefore, if we witness another
rise in long-term inflation expectations, it’s likely that the value of the
dollar will go up. Conversely, if the data doesn’t meet the forecasts, we can
expect the dollar to decline.
This article was written by FL Contributors at www.forexlive.com. Source