AUD/USD Forex Technical Analysis – Price Action Suggests Investors Having Mixed Reaction to Fed Minutes

The AUD/USD is trading nearly flat after the Fed released the minutes of its September monetary policy meeting. The Forex pair was pressured from its high after U.S. government debt yields traded mostly higher in response to the minutes and two Treasury auctions.

The Fed minutes showed policymakers see the economy expanding at a steady clip and an interest rate hike later this year a near lock, despite some divisions over where inflation is headed.

The Fed Funds futures market suggested traders saw an 88 percent chance the Fed would raise rates in December, little changed prior to the release of the latest Fed minutes, CME Group’s FedWatch program showed.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7733 will signal a resumption of the downtrend. Momentum will pick up to the upside on a move through .7848.

The minor trend will change to up on a trade through .7875.

The main retracement zone is .7848 to .7782. The market is currently straddling the lower or Fibonacci level of this range at .7782.

The minor range is .7875 to .7733. Its retracement zone at .7804 to .7821 acted like resistance on Wednesday.

The price action suggests traders are having a mixed reaction to the Fed minutes. If they believed it was hawkish, I think the AUD/USD would’ve tested .7733. And if it was dovish, the AUD/USD would have moved closer to the 50% level at .7848.

Even though the odds are high that the Fed will raise rates in December, the price action suggests investors are taking a cautious approach. The divided Fed policymakers may be keeping both buyers and sellers on the sidelines until after the U.S. consumer inflation data on Friday.  Bullish dollar traders are also nervous over Trump’s tax reform plan. The uncertainty over the passing of the plan is encouraging investors to lighten up on the long side.