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AUD/USD sits at 2-1/2 week tops, comfortably above mid-0.7100s ahead of FOMC minutes

   •  US-China trade optimism continues to underpin China-proxy Aussie.
   •  The prevalent USD selling bias remained supportive of the up-move.
   •  Further gains remained capped ahead of the FOMC meeting minutes.

The AUD/USD pair quickly reversed an early European session dip to 0.7145 area and is currently placed at the top end of its daily trading range, albeit lacked any strong follow-through.

A combination of supporting factors - a possible US-China trade-deal and a subdued US Dollar price action, helped the pair to regain positive traction on Wednesday and build on its post-flash-crash recovery move from almost a decade low. 

Trade optimism grew after Chinese and US delegates ended talks in Beijing on Wednesday. Officials said details will be released soon, amid signs of progress over a possible resolution to trade disputes between the world's two largest economies.

The positive trade-related development continued fueling risk-on mood and provided a strong boost to the China-proxy Aussie, which coupled with the prevalent USD selling bias lifting the pair to 2-1/2 week tops, around the 0.7170-75 region. 

Further gains, however, remained capped as investors now seemed reluctant to place any aggressive bets ahead of today's key event risk - release of the latest FOMC meeting minutes, due later during the US trading session. 

With investors already pricing in a possible pause in the Fed's rate hike cycle in 2019, the minutes will be closely scrutinized for fresh clues over the central bank's monetary policy outlook and eventually help determine the pair's next leg of a directional move. 

Technical outlook

Valeria Bednarik, FXStreet's own American Chief Analyst writes: “The AUD/USD pair hovers a handful of pips above the 61.8% retracement of its December/January slide, with bulls and bears battling for direction. In the 4 hours chart, the pair is being capped by a mild bearish 200 SMA, while holding above a bullish 20 SMA which advances above the 100 SMA. Technical indicators lack directional strength, the Momentum resting above the 100 level and the RSI hovering around 65.”

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