The AUD/USD plunges to a new monthly low of 0.7235 due to dismal sentiment and Fed commentary

In a market mood of risk-off, the Australian dollar fell more than 100 points.

Fed Chief Jerome Powell scared investors when he claimed that a 50-bps rise in May was "on the table."

AUD/USD Forecast: An increase in USD/AUD prices has accelerated a move to the 0.7200 area.

As market conditions worsen, the AUD/USD continues Thursday's losses and falls 130pips. Fed policymakers continued to telegraph a 50-bps rate increase in May's meeting. However, some investment banks anticipate 75-bps increases. The AUD/USD trades at 0.7248 as of this writing

The market mood is reflected in US equity markets, which are showing losses. The US 10-year Treasury yield has a modest loss of 1.903%. However, the greenback is still strong as shown by US Dollar Index. It gained 0.55% since 101.180.

Fed Chief Jerome Powell placed 50-bps increases in May "on to the table"

Some Fed officials stated that the US central banking needed to move "expeditiously” towards neutral. They also suggested that 50-bps increases to Federal Funds Rates might be necessary. Bullard, the St. Louis Fed President, stated that a 75-bps rate increase had to be considered. Fed Chair Powell said that a 50-bps rate increase in May's meeting was possible. This spooked investors because bond yields rose and US stocks fell on Friday, their worst week.

Nomura, a Japanese journalist, was also in the news with his prediction that the Fed would increase its rate by 75 basis points in June and July after a 50-bps rate hike in May.

AUD/USD Forecast: Technical outlook

In Thursday’s article I mentioned that "Thursday’s price action reversed Wednesday’s gains forming an top candle pattern," which is a signal that buyers have overtaken sellers, " threatening prices further down."

This is what happened Friday. After falling 130-pips, the AUD/USD fell 20-pips to the 100-day moving mean (DMA). The 50- and 200-DMAs remain above the exchange rate. This means that the AUD/USD could shift towards bearish if certain conditions are met.

The AUD/USD Friday close below the 100 DMA will increase the likelihood of a move towards 0.7000. However, it would face some obstacles on the way down. If this scenario is true, the AUD/USD would hit 0.7200 as its first support. Breaking below would expose March's cycle low of 0.7165, February's swing low at 0.7094, February's low at 0.7094, then February's low at 0.7051. This is short of 0.7000.


 

Date Of Update: 30 July 2022, 06:31

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