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Jun 15 - 11:55 PM

AUD/USD - COMMENT-AUD/USD Rally After Fed Hike May Be A Chance To Sell

By John Noonan  —  Jun 15 - 10:55 PM

The Australian dollar rallied against the greenback in a 'sell the rumour, buy the fact' response to the Federal Reserve's widely anticipated 75 basis-point rate hike on Wednesday. Yet with more aggressive Fed tightening expected, the AUD/USD rally may be a selling opportunity.

Major central banks have strongly indicated they are prioritising the fight against inflation over maintaining elevated growth.
Expectations of a global slowdown have risen - with many economists predicting a recession in the U.S. and other major economies nL2N2XG1OQnL1N2Y012I.

The AUD will remain vulnerable while global growth concerns weigh on equity markets and key commodities.
The U.S. dollar will likely remain elevated, as the latest Fed dot plot shows the median rate at 3.4% at end-2022 - up from 1.9% in March nL1N2Y12O3.

The AUD/USD has been underpinned by hawkish comments from the Reserve Bank of Australia on Tuesday nL4N2Y13NM. And Australian employment data for May was strong enough to spur aggressive RBA tighteningin the coming months nL1N2Y302W.

But the fate of the Australian dollar will likely be dictated by external factors, such as risk aversion, the USD trend and the direction of commodities.

AUD/USD bears should favour selling rallies towards the 10-day moving average at 0.7077 with a stop above 0.7125.
There is good resistance at the 21-DMA at 0.7107 and the 61.8 Fibonacci retracement of the recent 0.7282-0.6850 drop at 0.7117.
A break above those levels would suggest a bottom in in place and more upside can be expected.

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Source:
Refinitiv IFR Research/Market Commentary

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