The AUD/USD pair is in a delicate dance, teetering between bearish and bullish forces as the FOMC decision looms. While the Reserve Bank of Australia's (RBA) hawkish stance and an interim US-Iran peace agreement provide support, traders are hesitant to commit, preferring to wait and see. This indecision is reflected in the pair's current position, hovering above the 0.7050 level, but with a bearish near-term tone lingering.
The 0.7085-0.7090 confluence, comprising the 100-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement of the May-June downfall, acts as a crucial barrier. Momentum oscillators, such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), suggest a short-term downward trend, with the RSI near 43 and the MACD line below zero. However, the immediate hurdle is clustered around the 0.7085-0.7090 confluence, with further barriers at the 50% and 61.8% retracement levels.
On the upside, a sustained break above these levels could ease bearish pressure, exposing the 78.6% retracement at 0.7209 and the swing high near 0.7272. Conversely, the 23.6% Fibonacci retracement at 0.7046 and the monthly low near 0.6976 provide initial support. The RBA's primary mandate to maintain price stability and contribute to economic prosperity adds a layer of complexity to the AUD's performance.
The RBA's decisions, made by a board of governors at 11 meetings a year, impact the AUD's strength. Relatively high interest rates strengthen the AUD, while other tools like quantitative easing and tightening can have varying effects. The traditional view of inflation as a negative factor for currencies is challenged in modern times, as moderately higher inflation leads to interest rate increases, attracting capital inflows and boosting the local currency.
Macroeconomic data, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys, also influence the AUD. A strong economy may encourage the RBA to raise interest rates, further supporting the AUD. However, quantitative easing, a tool used in extreme situations, can result in a weaker AUD by printing Australian Dollars to buy assets.
In conclusion, the AUD/USD pair's current position is a reflection of the market's indecision, with the RBA's policies and global events playing a significant role. The pair's near-term bearish tone and the crucial 0.7085-0.7090 confluence make it a fascinating yet volatile trade, requiring careful consideration and a nuanced understanding of the underlying factors.
