AUD/USD Forecast: Still bullish despite Dollar’s Fed rally


AUD/USD Current Price: 0.6799

  • US Dollar recovers across the board after hawkish Fed hold.  
  • Australia to release May jobs report; employment expected to rise by 15,000
  • AUD/USD is still bullish, but if the pair holds below 0.6800, the risk of a correction increases.

The AUD/USD peaked prior to the Federal Reserve statement at 0.6837, the highest level since late February. Following the Fed’s decision, the pair pulled back sharply to the 0.6750 zone. Markets are digesting the latest events that could offset the incoming Australian employment data. Still, the trend in the pair is up. 

The Australian jobs report is due on Thursday. Employment is expected to rise by 15,000 after April’s 4,300 slide, and the Unemployment Rate to remain at 3.7%. These numbers will be watched closely. The Reserve Bank of Australia (RBA) could pause rate hikes at the July meeting, but markets expect it to hike again later. Incoming inflation data will be critical.

The Melbourne Institute will release its inflation expectation report. Inflation for the next 12 months is expected to slow down from 5% to 4.8%. Also, the RBA will release its Q1 bulletin, which should have no impact since it contains already-known data. China will release economic data (Industrial Production, Retail Sales, and House Price Index) that is relevant considering market expectations of more stimulus.

As expected, the Fed kept interest rates unchanged at 5.00%-5.25%. The projections showed a higher terminal rate than previously expected. The central bank kept the door open to more rate hikes. “I do expect that the July meeting will be a live meeting,” said Fed Chair Powell. US bond yields soared after the meeting as expectations of a rate cut by year-end faded significantly, and expectations of a hike at the July meeting rose. The US Dollar Index erased daily losses and recovered ground.

On Thursday, the US docket includes Retail Sales, Jobless Claims, the Empire Manufacturing Index, the Philly Fed Index, and Industrial Production. These are important numbers that could weigh on Fed expectations, particularly for year-end.

AUD/USD short-term technical outlook

The AUD/USD continues to challenge the 0.6800 area. It traded well above, but then pulled back. The pair is rising for the fifth consecutive day. The daily chart shows the Relative Strength Index (RSI) at overbought levels, suggesting some consolidation or correction ahead. However, the momentum is still strong, and the price is well above key moving averages and has surpassed a critical resistance around 0.6800/05 that capped the upside for months. 

On the 4-hour chart of AUD/USD, the price holds above a bullish 20-period Simple Moving Average (SMA). Ahead of the Asian session, the pair is attempting to climb back above 0.6800. The pair needs to rise above 0.6820 to keep the doors open to more gains. A failure at the current level would favor a correction. The relevant supports are seen at 0.6760 followed by 0.6735.

Support levels: 0.6765 0.6735 0.6675

Resistance levels:  0.6820 0.6845 0.6865

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