AUDUSD Forecast – Moving Toward 5-Month High on Bets for Less-Aggressive Fed

James Hyerczyk
Updated: Jan 24, 2023, 02:14 UTC

The current bullish price action suggests Aussie traders believe the Fed’s most hawkish days are behind it.


In this article:

The Australian Dollar is edging higher early Tuesday as Treasury yields dipped and the U.S. Dollar weakened. The move follows a strong surge the previous session that was fueled by a jump in demand for risky assets.

At 01:33 GMT, the AUDUSD is trading .7036, up 0.0008 or +0.11%. On Monday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $69.57, up $0.62 or +0.90%.

Bullish Traders Betting on End of Fed Rate Hike Cycle

The current bullish price action suggests Aussie traders believe the Fed’s most hawkish days are behind it. So expectations of the Fed moving closer to ending its rate hikes puts the U.S. Dollar at a disadvantage.

At the end of Monday’s session, Fed fund futures had priced out almost any chance the central bank could move by 50 basis points next month and have steadily lowered the likely peak for rates to 4.75% to 5.0%, from the current 4.25% to 4.50%.

Mixed Australian Economic News

Flash Manufacturing PMI came in at 49.8, lower than the previous reading, but Flash Services PMI was higher than the upwardly revised previous reading.

Australian business conditions moderated for a third straight month in December, while price pressures began to ease, pointing to a likely peak in inflation, according to a business survey issued on Tuesday.

The results may reduce pressure on the Reserve Bank of Australia (RBA) to increase interest rates at its next policy-setting meeting on Jan. 31.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7064 will signal a resumption of the uptrend.  A move through .6688 will change the main trend to down.

The minor trend is down. A trade through .7064 will change the minor trend to up, while shifting momentum to the upside. The minor bottom support is .6872 and .6860.

The nearest support is a minor pivot at .6968. The closest resistance is the Aug. 11 main top at .7137.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at .6968 is likely to determine the direction of the AUDUSD on Tuesday.

Bullish Scenario

A sustained move over .6968 will indicate the presence of buyers. If this continues to generate enough upside momentum then look for a surge into the minor top at .7064. Taking out this level will indicate the buying is getting stronger. This could trigger an acceleration into the Aug. 11 top at .7137.

Bearish Scenario

A sustained move under .6968 will signal the return of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the support cluster at .6876 – .6872.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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