AUD/USD jumped around 1% as the US dollar slumped more broadly after the FOMC statement and especially Powell's press conference.
If you need a catch up:
- Federal Reserve hike rates by 25 basis points, as expected
- Powell opening statement: We have more work to do
- Powell Q&A: It is important that financial conditions reflect policy restraint in place
- Powell opens the door to rate cuts this year "if inflation comes down much faster"
- A comparison of the December 2022 FOMC statement to the February 2023 statement
- The full FOMC statement from the February 2023 Federal Reserve meeting
And, a small collection of initial responses:
OK, as for the Australian dollar. AUD was marked higher, alongside pretty much everything against the US dollar. US yields fell, risk assets gained more broadly.
Also acting as tailwinds for the AUD in recent days and weeks have been:
- China's reopening, added stimulus, and improving economic indicators (the higher PMIs this week are encouraging)
- The Reserve Bank of Australia remains on a hiking path, the latest inflation figures have monthly CPI well above 8% and the quarterly at 7.8% The RBA's cash rate is at a generous 3.1%. Its going higher folks, beginning with a 25bp rate hike coming next Tuesday, February 7 (that's IMO but its consensus). There are still some tipping an 'on hold' but many of them are relenting in the face of the horrific CPI data and switching to the February rate hike camp. As Keyne's (reportedly) says: "When the facts change, I change my mind." If you are trading, there is no alternative to this.
Levels to watch for AUD/USD:
- Resistance circa 0.7170/75 & 0.7200/05
- Support is nestled now around 0.7095/0.7100 & 0.7040/50
ps. Those levels are not chiselled in stone - let me know yours in the comments, please!