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AUDUSD Market Analysis – Will The Fed Change Their Forward Guidance?

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  • The US Dollar Index rises close to a 2-week high as the Federal Open Market Committee’s meeting approaches.
  • US inflation struggles to drop below 3.00% for nine consecutive months. Investors are keen to hear whether the Fed is considering 3 interest rate cuts or less.
  • Investors will scrutinise tomorrow’s statement and press conference to determine if the Fed will hike in June 2024.
  • Gold declines during this morning’s Asian session but does not form more than a retracement and descending triangle.

AUDUSD – RBA Keeps Interest Rates Unchanged!

The AUDUSD currently has the lowest spread amongst the “major currency pairs” category and has fallen to its lowest price since March 6th. The Australian Dollar is the worst performing currency of the day and is declining in value against the Yen, GBP, NZD and Euro. The AUDUSD has fallen 0.77% so far today which is more than most other pairs and it is a pair which is not conflicting in terms of individual price action.

The Reserve Bank of Australia kept their interest rate unchanged during this morning’s rate decision. The Governor’s Press Conference was as expected and advised “all options remain on the table”. This means the regulator would be happy to hike if needed as well as cut if inflation continues to decline. Economists saw the comments from the Governor as slightly more dovish as she said, “We’re making progress in our fight against inflation, but it does remain high”. Some economists deemed this as enough to take hikes off the table. Most economists continue to believe the RBA will cut later in the year, most likely after the Fed, ECB and BoE.

The exchange rate will primarily be driven by the Fed’s Rate Decision and Press Conference tomorrow evening. In addition to this, the pair will also see volatility when Australia releases its employment data on Thursday. Australia’s employment data is believed to show resilience as the unemployment rate slightly falls to 4.1% and employment change rises to a 3-month high.

The US Dollar Index has been rising in value for six consecutive hours as we move away from the Asian session into the European. Traders are taking a serious look at the AUDUSD for three main reasons: higher volatility, non-conflicting price action amongst the two currencies and the low spread. Non-conflicting price action means one currency is increasing against all currencies while the other is decreasing. Trend and momentum indicators indicate a bearish trend, while support levels remain 0.35% below the current price.

XAUUSD – Will The Fed Still Consider 3 Rate Cuts In 2024?

The price of Gold is being pressured by two factors: the rise in the price of the US Dollar and the more attractive Japanese Yen. Both are safe haven assets and are competing with Gold for investments. However, the XAUUSD’s price is more than a descending triangle pattern. A descending triangle pattern is known to be a “neutral-bearish” signal and forms nothing more than a retracement.

The price will largely depend on tomorrow’s Federal Reserve’s statement and press conference. The issue is that the Federal Reserve have been unable to push inflation below 3.00% over the past 12 months which is longer than they would have liked. Producer inflation also continues to grow which indicates inflation will also remain high in March. Adding to the concerns is the rise in Oil which fuels inflation. If oil rises a further 1.15%, it will trade at highs seen in October 2023.

If the Federal Reserve push back interest rate cuts and indicate less cuts than previously thought, the price of the Dollar can rise, and investors may temporarily reduce exposure to Gold. According to the Fibonacci levels, a longer-term retracement can see the price decline to $2,064 to $2,089. However, this is if the Fed opt to become more hawkish.

Michalis Efthymiou

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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