- AUD/USD bulls have their eyes on 0.6720 despite the aggressive stance from the Fed.
- The US dollar is down from post Fed rate hike highs.
The AUD/USD has bounced back after a 30 pip drop below the 0.6650 round level that came on a knee jerk reaction to the Fed rate hike. However, the AUD/USD rallied from the trading session low 0.6621 to 0.6705 during the Fed press conference and returned to the Tokyo highs in an explosive move against the downtrend. Technically, the rally occurred based on a harmonic pattern, as illustrated below.
Meanwhile, the conclusion of the two-day meeting of the Federal Open Market Committee resulted in the Federal Reserve unanimously deciding among its members to raise interest rates by 75 basis points. The decision and additional details surrounding the Fed’s dot plot and economic forecasts have initially pushed up US yields and the dollar, however, there has been a turnaround and the greenback is back on track. trading below the 111 zone.
Rate hike expectations and Russian President Vladimir Putin’s decision to mobilize more troops for the Ukraine conflict had already pushed the dollar to a two-decade high before the Fed. The DXY index, which measures the US dollar against the a basket of currencies, was reaching the 111 zone, but after the Fed’s announcement, the index soared to a high of 111,578. Since then, it has pulled back and tested a trend line support zone near 110.60.
AUD/USD technical analysis
Price completed a deep crab harmonic pattern. After selling at 0.6625, price rallied again to attract buyers and hit stops at and around 0.6655 for a fill of positions accumulated towards the 0.67 area in what has been a stealthy downtrend established since the opening of the week.
Price is now expected to complete a measured move towards 0.6725 following a correction to the upper quarter of the 0.66 area, if not back to 0.6650 following the break of those structures and trendline resistance now expected to act as support for the opposite trend line.
Source: Fx Street
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