- The Reserve Bank of Australia recently surprised markets by announcing details of its bond purchase tapering.
- The 61.8% Fibonacci retracement level is likely to support the AUD/USD pair at 0.7358.
- Forex trading market participants may sell below the $0.7358 level to target $0.7320 and 0.7287.
During Wednesday’s Asian trading hours, the AUD/USD currency pair extended its previous session’s bearish bias. It dropped to three-day lows, further below the 0.7400 level. However, the downside rally was mainly sponsored by the RBA’s surprise move. On Wednesday, the AUD/USD price prediction remains bearish. However, the 61.8% Fibonacci Retracement level is likely to support the pair at 0.7358.
If you are interested in trading AUD/USD with forex robots, check out our guide.
Rate Statement from the Reserve Bank of Australia
The Reserve Bank of Australia recently surprised markets by announcing details of its bond purchase tapering. It kept the benchmark interest rate unchanged at 0.10%. Furthermore, it maintained the 0.10% target for the April 2024 Australian Government bond.
The Rate Statement fueled economic fears due to the virus-led local lockdowns and the AUD/USD. Meanwhile, the strong follow-through of sharp increases in US Treasury bond yields aided the US dollar’s recovery from one-month lows. This was seen as one of the key factors that kept the AUD/USD pair down.
Risk-off sentiment undermines the AUD/USD pair.
In addition to this, the market’s prevalent risk-off sentiment, backed by multiple factors, also played a significant role in undermining the AUD/USD pair.
At this particular time, the AUD/USD pair is trading at 0.7370 and consolidating in the range between 0.7365 and 0.7405. The AUD/USD currency pair initially edged higher after the Reserve Bank of Australia moved ahead with the plan to taper its bond-buying to A$4 billion a week.
However, the gains were short-lived as the extension of the purchase period from November 2021 to February 2022 disappointed market participants. This, in turn, weighed on the Australian dollar and fueled some fresh selling around the AUD/USD currency pair.
Fears of Covid-19 Continue to Play
On the other hand, the doubling of virus-related hospitalizations in the United States in a year and a 67% increase in covid-related deaths in the last two weeks has heightened COVID-19 fears in the United States. Thus, it exerted additional pressure on the weaker market sentiment and provided a goodish lift to the safe-haven US dollar.
The US 10-year Treasury yields got a lift from the risk aversion wave and crossed last month’s high. It’s underpinning the US Dollar Index (DXY) to mark the biggest daily jump since August 19.
In that way, the downfall in the currency pair has been exclusively sponsored by broad-based USD strength. The broad-based US dollar hit near a one-week high on Wednesday against major peers, buoyed by higher Treasury yields.
The strong follow-through positive move in the US Treasury bond yields helped the US dollar to recover further from one-month lows touched in reaction to the dismal headline NFP print. Furthermore, the benchmark 10-year US government bond yield grew past 1.36% amid expectations that the Fed might still start rolling back its pandemic-era stimulus in November. The US Dollar Index that tracks the greenback against a bucket of other currencies rose by 0.03% to 92.543 by 12:01 AM ET (4:01 AM GMT).
In the absence of important data, the market traders will keep their eyes only on the headlines, including COVID and stimulus headlines, which could entertain the traders. Meanwhile, the comments from Fed New York President John C. Williams will be key to watch.
AUD/USD Price Forecast – Technical Levels
S3 0.7401
S2 0.7419
S1 0.7428
Pivot Point 0.7436
R1 0.7445
R2 0.7453
R3 0.747
AUD/USD Completes 61.8% Fibonacci Retracement
On Wednesday, the AUD/USD price prediction remains bearish. However, the 61.8% Fibonacci Retracement level is likely to support the pair at 0.7358. On the 4 hour timeframe, the AUD/USD is heading lower towards the next support area of 0.7358. This support level is being extended by a 61.8% Fibonacci retracement level and a double bottom support level. Lately, the stronger dollar has triggered the bearish breakout on an upward trendline.
At the moment, the AUD/USD currency pair is trading at the 0.7363 level. A breakout of the 0.7358 trading level is likely to lead the AUD/USD currency pair towards the next support levels of 0.7320 and 0.7287.
However, in case of a failure to break below the 0.7358 level, the currency pair has the potential to bounce off above the 61.8% Fibonacci correction level. On the bullish side, the AUD/USD has the potential to buy until the next resistance level of 50% and 38.2% correction levels of 0.7380 and 0.7403.
Taking a look at the 50 period EMA (exponential moving average – red line), it is holding around the 0.7420 level. The closing of candles below this level supports a strong selling bias in the AUD/USD currency pair. Moreover, the leading indicator, Stochastic RSI, stays below 50, maintaining the bearish trend in the pair.
With that being said, investors are likely to keep an eye on the 0.7358 level. Therefore, the Forex trading market participants may sell below the $0.7358 level to target $0.7320 and $0.7287. Alternatively, traders can take a buying position above the $0.7355 level today. All the best!
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