AUDUSD Forecast – Weaker on Profit-Taking Ahead of Wednesday’s Fed Interest Rate Decision

The Australian Dollar is edging lower on Monday as U.S. Treasury yields and the U.S. Dollar firmed ahead of a key interest rate decision by the Federal Reserve on Feb. 1. The Aussie is also being pressured by profit-taking and position-squaring after gaining nearly 2.0% last week.

Traders are also reacting to Chinese traders returning from the country’s Lunar New Year holiday with some reluctant to chase the Aussie Dollar higher after last week’s stellar gains. Meanwhile, traders are also bracing for the release of China’s purchasing managers’ index (PMI) on Tuesday. Traders are anxious to see if the lifting of COVID-19 restrictions had a positive impact on manufacturing.

At 07:07 GMT, the AUDUSD is trading .7095, down 0.0014 or -0.20%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $70.42, down $0.06 or -0.09%.

Ahead of the start of the Fed’s two-day meeting on Tuesday, futures traders are betting the Fed will raise its benchmark rate 25 basis points. This will likely be followed by another 25 basis point rate hike in March. The Fed will then stop and evaluate the impact of the moves.

Meanwhile in Australia, following last week’s stronger-than-expected consumer inflation report, the Reserve Bank (RBNZ) is now expected to raise its benchmark by 25 basis points at next week’s policy meeting.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7143 will signal a resumption of the uptrend. A trade through .6688 will change the main trend to down.

The minor trend is also up. A trade through .6872 will change the minor trend to down. This will shift momentum to the downside.

Last week’s rally stopped at .7143, just a little higher than the Aug. 11 top at .7137. This makes .7137 – .7143 resistance.

The minor range is .6872 to .7143. Its pivot at .7007 is the nearest support.

Daily Swing Chart Technical Forecast

Trader reaction to .7111 is likely to determine the direction of the AUDUSD on Monday.

Bearish Scenario

A sustained move under .7111 will indicate the presence of sellers. Taking out .7079 will make .7143 a new minor top and could trigger an acceleration to the downside with the minor pivot at .7007 the primary downside target.

Bullish Scenario

A sustained move over .7111 will signal the presence of buyers. If this move creates enough upside momentum then look for a surge into .7143. Taking out this level will signal a resumption of the uptrend and could signal the start of an eventual climb into the June 3 main top at .7283.