Consolidating around the 0.7250 region

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  • Risk appetite helps AUD / USD gain some positive traction on Wednesday.
  • Optimistic expectations from the Fed act as a tailwind for the USD and limit the pair’s gains.
  • The technical setup favors the bears and supports the prospects for further losses.

AUD / USD is struggling to capitalize on its modest intraday gains and remains in consolidation around the 0.7250 region during the first half of the European session on Wednesday.

Risk appetite in the markets has weighed on demand for the safe haven US dollar and has been seen as a key factor providing a modest rise to the perceived riskier Australian dollar. However, expectations of an imminent announcement from the Fed have acted as a tailwind for the USD and limited gains in the AUD / USD pair.

Looking at the technical picture, the recent pullback from the highest level since mid-July, touched earlier this month, has occurred along a descending channel. This points to a short-term downtrend and supports the prospects for further losses. Investors, however, appear reluctant to open aggressive positions ahead of the FOMC’s crucial monetary policy decision.

Meanwhile, technical indicators on the daily chart remain deep in bearish territory and have started to gain negative traction on the 1 hour charts again. Therefore, a subsequent decline below the 0.7220 area, or monthly lows, towards challenging the trend channel support near the 0.7200-0.7195 region, remains a clear possibility.

Some continuation selling will be seen as a new trigger for the bears and will make the AUD / USD pair vulnerable. The next relevant support is near the 0.7130 level, below which the downward trajectory could extend further towards the yearly lows, around the round 0.7100 level touched on August 20.

On the other hand, the highs of the previous day, around the 0.7280 zone, now appear to act as immediate resistance. This is closely followed by the upper limit of the mentioned channel, currently around the 0.7300 level. A convincing break above this level will negate the negative bias and trigger some short covering move towards the 0.7345-50 region.

AUD / USD 4-hour chart

AUD / USD technical levels

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