Australian Dollar hangs near three-week low, above 0.7100 as USD stands firm ahead of Fed
The AUD/USD pair sticks to a negative bias for the second consecutive day and trades around the 0.7120 region during the early part of the European session on Tuesday.
The Australian Dollar struggles near a three-week low near 0.7100 during Tuesday's European trading session, as the US Dollar maintains its strength ahead of the Federal Reserve's meeting. Despite trading above the over three-week low set on Monday, market participants remain cautious in the face of pending key economic data and Fed policy decisions.
The US Federal Reserve is set to disclose its stance on Wednesday, following a surge in rate hike expectations fueled by last week's higher-than-anticipated inflation figures. Investors will be closely watching the Fed Chair Kevin Warsh's comments during the post-meeting press conference for any hints about the potential trajectory of interest rates.
The US Dollar's defensive posture amid inflationary pressures stemming from high energy prices is expected to bolster its strength and add impetus to the AUD/USD pair as market players anticipate a hawkish stance from the US central bank. Meanwhile, geopolitical tensions between the US and Iran, along with mixed economic data from China, are adding to the AUD's downward pressure.
The Reserve Bank of Australia's potential rate hike this month, driven by robust economic growth and persistent domestic inflation, could provide some support to the Australian Dollar. However, traders should exercise caution before taking on fresh bearish positions on AUD/USD, as momentum appears to be weakening, with the Relative Strength Index (RSI) nearing the neutral 50 level and the Moving Average Convergence Divergence (MACD) slipping into negative territory.
In the short term, the AUD/USD pair is looking bullish, with support from the 100-day Simple Moving Average (SMA) at 0.7080 and a cluster of Fibonacci support levels between the 38.2% retracement at 0.7093 and the 50.0% level at 0.7049. However, the pair must overcome initial resistance at the 23.6% Fibonacci retracement at 0.7147 and the recent cycle high near 0.7234 to sustain upward momentum.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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