AUD/USD, Australian dollar - Technical Outlook:
- AUD/USD’s short-term trend remains up.
- AUD/USD is testing key resistance ahead of the US Fed rate decision.
- What is the outlook and what are the key levels to watch?
AUD/USD TECHNICAL FORECAST - BULLISH
The Australian dollar has run into key resistance against the US dollar ahead of a spate of central bank interest rate decisions in the coming week, including the US Federal Reserve, the European Central Bank (ECB), and the Bank of England (BoE).
Price, Sentiment, Fundamental Snapshot
While the ECB and BoE are expected to continue hiking into 2Q, the futures market is pricing in just one more rate hike by the Fed beyond the Feb. 1 quarter-point hike. Recent comments suggest Fed officials have become comfortable with slowing the pace of hikes, in line with the recent inflation prints. The key focus will be on whether the Fed signals an end of the tightening cycle or chooses to keep rates restrictive for some time with incoming data to provide further guidance.
AUD/USD Weekly Chart
Chart Created Using TradingView
Meanwhile, AUD/USD has risen to a seven-month high after Australian inflation came in higher than expected, boosting the case for a quarter-point hike by the Reserve Bank of Australia when it meets on Feb. 7. In addition, AUD/USD has been aided by growing optimism over China’s reopening and rising commodity prices.
On technical charts, AUD/USD has been nicely guided within a rising channel since October. Earlier this month, the pair rose above key resistance on the 200-day moving average, confirming that the short-term trend remains up. This follows a hold last month above key support at the mid-November low of 0.6585 – a key support for cementing the higher-top-higher-bottom pattern.
AUD/USD Daily Chart
Chart Created Using TradingView
However, AUD/USD has now run into a stiff resistance area: the 200-week moving average, coinciding with the 89-week moving average and the August high of 0.7135. While the broader upward momentum in the pair remains intact, a minor retreat can’t be ruled out in the short term, especially if the Fed doesn’t signal a pause. Immediate support is at the psychological 0.7000 mark, stronger support is at the mid-December high of 0.6895.
--- Written by Manish Jaradi, Strategist for DailyFX.com
