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  • AUD/USD has been on the back foot for most of Wednesday’s session amid a risk-off market/stronger US dollar.
  • The pair found strong support in the 0.7640s, however.

AUD/USD has traded on the back foot thus far on Wednesday, dropping from Asia Pacific highs of above the 0.7750 mark, seen in the immediate aftermath of stronger than forecast Q4 CPI numbers, to within a whisker of 2021 lows just beneath the 0.7650 mark around the start of the US trading session. Spot prices have since recovered back to the 0.7680s, with trades seemingly taking some profits on short positions ahead of Wednesday’s main event; the Fed will release the results of its latest FOMC monetary policy decision at 19:00GMT, followed by a press conference on the decision with Fed Chair Jerome Powell at 19:30GMT.

Driving the day

Risk-off has been the name of the game thus far on Wednesday. Downside in European and US equities has led the dance. Bond yields have moved lower. Industrial commodities have moved lower (crude oil is the exception following strong inventory numbers). Risk-sensitive currencies (like AUD) are the worst performers in the G10) and USD is the strongest. Market commentators are citing a combination of Covid-19 lockdown, travel restriction and new variant concerns, fears of potential EU vaccine protectionism and profit-taking amid fears that, amid all the retail-driven speculative mania being seen in small-cap stock prices, the broader equity market might be in bubble territory.

Strong support in the 0.7640s

AUD/USD saw strong support when it fell into the 0.7640s. As the pair approached the 2021 low at 0.76422 and 17 December 2020 high at 0.76396, dip buyers rushed in. In fact, some very interesting technical action was seen; AUD/USD broke below an uptrend linking the 4, 18 and 26 January lows around the start of the US session and bears were obviously targeting short-term downside to the 0.7640 area. Here, the short-term bears took profit and longer-term bulls jumped in to get long. Markets will now mull whether AUD/USD can rally back towards daily highs in the 0.7750s. Much will depend upon how markets and the US dollar react the Wednesday’s FOMC meeting.

AUD/USD four hour chart