AUD/USD Rises As Fed Keeps Monetary Policy Unchanged


The Australian Dollar (AUD) rose against the US Dollar (USD) on Friday, increasing the price of AUDUSD to more than 0.7200 following the Federal Reserve interest rate decision. The technical bias remains bullish in the short term because of a higher high and higher low on the four-hour timeframe.

Technical Analysis

The AUD/USD pair soared up to 0.7275 on the back of dollar weakness, but reversed most of its post-FED’s gains as US stocks turned south and closed in the red after the initial move higher. The pair, however, is closing the day pretty much unchanged, a few pips below the 0.7200 level, maintaining the upward potential in the long term, as in the daily chart, the Momentum indicator continues heading higher well above its mid-lines, whilst the pair posted a higher high and higher lows.

In shorter term, the 1 hour chart shows that the price is a few pips above a flat 20 SMA, whilst the technical indicators have turned sharply lower from overbought levels, and are about to cross their mid-lines towards the downside. In the 4 hours chart, the technical indicators are also retracing from overbought readings, whilst the 20 SMA heads strongly higher around 0.7160, providing an immediate short term support that if broken, will signal a stronger downward continuation.

Fed Rate Decision

Fed policy makers voted 9-1 to keep interest rates near zero due to global headwinds that could slow the economy and keep inflation subdued. The central bank’s concerns about inflation come even as the outlook for jobs is viewed as improving.

Recent economic indicators pointed to a strengthening labor market, but inflation remains well below the Fed’s desired target of 2%, largely due to a drop in energy prices. Yellen described inflation as a transitory problem for the economy.

Trade Idea

Considering the overall technical outlook, selling the pair around current levels in short term could be a good strategy because of a bearish pin bar which emerged on daily chart yesterday.

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