Today will be a very important one for the US dollar with the FOMC expected to announce their interest rate decision. All signs point toward a rate hike given the string of positive news from the US, so you would expect that an AUD/USD Forex pair analysis would be bearish.
However, some experts say that the markets are so confident of a rate hike that they are already pricing it in. If this is the case, then the price of the AUD/USD may not move all that much. Looking at the chart below, you can already see that the US dollar has been stronger than the Australian over the past two weeks.
On the 2nd of March, it was reported that unemployment claims had dropped significantly. The markets had expected a slight increase, but the drop from 242 to 223 thousand was enough to break the AUD/USD Forex pair below the 200-SMA up to the support level around 0.755. After the drop, the pair rebounded slightly but was unable to keep the momentum and moved sideways for a bit.
The US NFP was again positive showing that employment was up and unemployment down to 4.7% from the previous 4.8%. This caused the AUD/USD Forex pair to break below the previous support level for a while before breaking above it once again. At the moment, the pair has formed an oscillating pattern on the 1-hour chart, which shows the anticipation in the markets for the FOMC decision.
You will also see that the pair has broken its downtrend and is staying above the support level. This followed a report of increased home loans by 0.5% on the 10th of March up from last month’s 0.2% and expectations of a drop. Despite this uptrend, the Australian dollar was unable to sustain the uptrend after data from China was released.
Both retail sales and industrial production numbers rose in China, but not too far from what the markets expected, so the Australian dollar did not gain too much from this. The RBA confirmed that it was not going to raise interest rates this year, so that is also something to keep in mind.
What to expect and watch with the AUD/USD Forex pair
What we’ve been seeing with the previous downtrend is quite the phenomena with this pair given the strength of the Australian dollar. It was one of the few currencies to battle the US dollar during its November-January uptrend. Which gives strength to the theory that markets have been pricing in the March rate hike. So, if the rate hike does happen, the downtrend will continue, and the 0.747 regions will be one to watch in the short term.
Nevertheless, you should not expect a major move with the AUD/USD Forex pair after the FOMC decision is announced as compared to other currency pairs. Unless the rate hike doesn’t happen, which would give strength to the Australian dollar pushing it up to the 0.760 level. These will be the levels to watch, so you should be quick on the trigger when the FOMC decision finally comes through.