AUD / USD cuts early losses, stabilizes around 0.7770 ahead of FOMC

• AUD / USD fell sharply after soft inflation data from Australia.
• The US Dollar Index did not stay above 91.00 in the second half of the day.
• With an eye on the FOMC policy announcements and President Powell’s press conference.

The pair AUD/USD came under heavy downward pressure during Asian trading hours and fell to a daily low of 0.7725. However, with the dollar struggling to find demand ahead of the FOMC policy announcements, the pair managed to rebound and was last seen posting small daily gains at 0.7769.

Focus shifts to the FOMC

Data from Australia revealed on Wednesday that the Consumer Price Index (CPI) in the first quarter fell to 0.6% on a quarterly basis from 0.9%. Additionally, the Reserve Bank of Australia’s trimmed average CPI fell to 1.1% annually, disappointing market expectations of 1.2%. The soft inflation figures triggered a selloff of the AUD and forced AUD / USD to drop sharply.

In the second half of the day, the dollar lost its strength with cautious investors ahead of the FOMC’s Monetary Policy Statement and President Jerome Powell’s press conference. The US dollar index, which rose to a daily high of 91.12, is currently down 0.05% to 90.84.

In anticipation of this event, “the meeting ending on Wednesday is unlikely to bring major policy changes and will not be accompanied by new economic projections,” analysts at Capital Economics said. “We hope the statement is more optimistic about the economic outlook, but President Jerome Powell is likely to emphasize in his press conference that any change in policy stance is still a long way off.”

Technical levels