AUD/USD Forecast: Fed Interest Rate Decision in Focus

AUD/USD Outlook: AUD/USD

AUD/USD may attempt to retrace the decline from the monthly high (0.6522) as it extends the advance from the start of the week, and the Federal Reserve interest rate decision may do little to curb the recent advance in the exchange rate as the central bank is expected to retain the current policy.

AUD/USD Forecast: Fed Interest Rate Decision in Focus

Keep in mind, AUD/USD registered a fresh yearly low (0.6358) earlier this month as it seems to be tracking the negative slope in the 50-Day SMA (0.6547), but more of the same from the Federal Open Market Committee (FOMC) may prop up the exchange rate as the central bank appears to be nearing the end of its hiking-cycle.

Join David Song for the Weekly Fundamental Market Outlook webinar. Register Here

US Economic Calendar

FOREX.com Economic Calendar

As a result, the US Dollar may face headwinds if the FOMC shows a greater willingness to keep US interest rates unchanged over the remainder of the year, but fresh forecast from Chairman Jerome Powell and Co. may sway foreign exchange markets as the Fed continues to combat inflation.

As a result, AUD/USD may struggle to retain the advance from the start of the week if the update to the Summary of Economic Projections (SEP) reflects a higher trajectory for US interest rates, and the diverging paths for monetary policy may drag on the exchange rate as the Reserve Bank of Australia (RBA) keeps the official cash rate (OCR) on hold for the third consecutive meeting in September.

With that said, more of the same from the Fed may keep AUD/USD afloat as it fuels speculation for a looming change in regime, but the exchange rate may struggle to retain the advance from the start of the week if the central bank shows a greater willingness to pursue a more restrictive policy.

AUD/USD Price Chart – Daily

Chart Prepared by David Song, Strategist; AUD/USD on TradingView

• AUD/USD seems to be tracking the negative slope in the 50-Day SMA (0.6547) as it registered a fresh yearly low (0.6358) earlier this month, but the recent rebound in the exchange rate may lead to a test of the monthly high (0.6522) as it extends the advance from the start of the week.
• A break/close above the 0.6510 (38.2% Fibonacci retracement) to 0.6520 (23.6% Fibonacci retracement) region may push AUD/USD towards the moving average, with the next area of interest coming in around 0.6590 (38.2% Fibonacci extension) to 0.6600 (23.6% Fibonacci retracement).
• However, failure to test the monthly high (0.6522) may bring the 0.6380 (78.6% Fibonacci retracement) to 0.6410 (50% Fibonacci extension) area back on the radar, with a breach below the monthly low (0.6358) opening up the November 2022 (0.6272).

Additional Market Outlooks

Canadian Dollar Forecast: USD/CAD Rebounds Ahead of Canada CPI

Euro Forecast: EUR/USD Post-ECB Selloff Puts May Low in Focus

--- Written by David Song, Strategist

Follow on Twitter at @DavidJSong