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AUD/USD better bid post FOMC, but needs to get over the line ...

  • AUD/USD upside underpinned by FOMC minutes confirming the narrative. 
  • AUD/USD trades at 0.7186 currently, slightly off the recent high of 0.7194 and up from a low of 0.7133.

AUD/USD is creeping higher within the short term bull channel and is testing the vicinity of R1 following the FOMC minutes. the FOMC December meeting minutes have confirmed the market's sentiment that indeed the Fed is taking a more patient approach to rate hikes which has been priced into the dollar already. Instead, the real risk for AUD/USD traders will now be with domestic and global economic data and trade relations between the US and China.

Caution remains over Sino/US dispute

Meanwhile, on the Sino/US political front, analysts at ANZ Bank explained that trade talks concluded with positive comments by officials on both sides:

"China reportedly agreed to increase imports of US energy, manufactured and agriculture goods. However, there is little to report regarding the more difficult aspects, such as intellectual property rights, technology transfer and non-tariff barriers. On that front, officials have until 1 March to reach a deal. Overall, the positive tone has provided risk a much needed shot in the arm, but caution remains over the hard-to-do aspects and the potential for these to cause another flare-up in the tit-for-tat dynamic that has prevailed in the past. China and the US are reportedly planning on releasing a joint statement Thursday morning in Beijing."

AUD/USD levels

Bulls will target the 0.74 handle (Dec high 0.7394) and a break of the 200-D SMA located currently at 0.7334 - (today's highs in the 0.7190s need to give). There is little fundamental reason to expect a pullback, but should the market be looking for a discount before a significant leg up, S3 is located at 0.7080. Below S3, 0.7020 falls in around the support line of late Dec business guarding territory down towards the flash crash lows and the lowest levels that have been seen in ten years. 

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