General analysis AUDUSD for 06.04.2022
Current dynamics
The AUD/USD pair reached a ten-month high on Tuesday, but failed to maintain progress and lost sharply amid a speech by Fed open market committee member Brainard.
Yesterday the Reserve Bank of Australia announced its interest rate decision. As expected the regulator kept the rate at 0.10% but raised the chances of monetary policy tightening. The pair responded with a sharp rise at the opening of the European session and after a brief correction reached mid-2021 levels. However, closer to the opening of the US session, one of the most cautious Fed officials Lael Brainard gave a hawkish speech. The Fed Vice Chair said that the priority for the regulator is the fight against inflation and that in addition to monetary tightening, the accelerated reduction of the central bank's bloated trade balance sheet is needed to achieve the result. The process of reduction is expected to start immediately after the May monetary policy meeting.
The Fed has embarked on a very aggressive yet risky policy path. Balance sheet reduction would lead to an increase in treasury yields which would increase share prices, further sell-offs at the peak, and lead to an eventual decline of indices. This is the most likely scenario in the current environment and will lead to a medium-term strengthening of the dollar against major currencies. At the same time, balance sheet reduction has the same effect on the economy as monetary policy tightening. With the key rate hitting 3.5% in the middle of next year, high recession risks are forming in the US economy.
Today at 20:00 (GMT+2), the minutes of the Fed's March meeting will be published. Tomorrow at 03:30 (GMT+2), Australia will release trade balance data.
Support and resistance levels
On the 4-hour chart, the instrument is consolidating in the upper Bollinger Band range. The indicator is pointing upwards and the price range is contracting, indicating a change in the current trend. The MACD histogram is in the positive zone, holding a buy signal. Stochastic has entered the oversold area, a strong buy signal is expected within 1-2 days.
- Support levels: 0.7300, 0.7375, 0.7450, 0.7500, 0.7560.
- Resistance levels: 0.7600, 0.7640, 0.7690.
Trading scenarios
- Short positions should be opened below 0.7545 with targets of 0.7500, 0.7450, and a stop loss at 0.7605. Implementation period: 1-2 days.
- Long positions can be opened above the level of 0.7605 with a target of 0.7675 and a stop-loss at 0.7550. Implementation period: 1-2 days.