The mood on the AUD/USD trading desk has become increasingly tense and full of suspense. Consistent selling pressure since mid-May has now brought the market to a decisive phase.
The bearish momentum is at its strongest, while retail buyers are now caught in a panic, seeing prices creeping close to the death zone.
FOMC Minutes RBA Feet Up
Today's global fundamentals were further fueled by concerns about monetary policy tightening contained in the official FOMC document.
The market was surprised by the revelation that the majority of Fed committee members agreed that some policy firming would be a necessary step if consumer inflation proved stubbornly above the 2% target.
This matter is of great importance to the market because it confirms that the US federal funds rate target range of 3½ to 3¾ percent is not the absolute peak if the global energy price shock continues.
On the Australian mainland, on the other hand, a fractured labour market with unemployment soaring to 4.5% has effectively killed the RBA’s chances of moving in tandem, causing hedge funds to dump Aussie holdings in droves to chase US bond yields.
MARKET TECHNICAL STRUCTURE
AUD/USD Daily Chart
Current Bias: Bearish (Market dominated by sellers).
Resistance MA-21 ($0.71839): This price level has been acting as a dynamic resistance level. The rebounce attempt a few days ago failed below this MA-21 line, proving that sellers are defending their position.
Current Support Levels ($0.70215 – $0.70932): This price level is a critical reaction area that has been the Aussie’s savior since April. If today’s daily price manages to close below 0.70932, it will immediately erase the bullish narrative.
Breakout Target ($0.70214): Once the $0.70932 barrier collapses, the downside will open wide without major obstacles towards the next structural support line at 0.70214.
MARKET EXPECTATIONS
Scenario A: US PMI / Manufacturing Data Remains Strong (Aussie Falls Immediately)
If tonight's S&P Global PMI or US inflation data comes out above expectations, it will support the hawkish statement in the FOMC minutes. Immediately, the Dollar will get a new momentum boost, breaking the $0.70932 support level and driving the price straight to the $0.70214 technical target level.
Scenario B: USD Technical Profit Taking at Support Border (Temporary Bounce)
If the US data misses briefly and triggers profit taking activity in the USD, the AUD/USD price may make a temporary technical bounce retesting the MA-21 resistance zone around 0.71840 before continuing its plunge again.
