AUD/USD Price Forecast: Ascending 20-day EMA backs more upside
- AUD/USD trades lower to near 0.6980 as the US Dollar remains firm.
- Weak Fed dovish speculation for the next two policy meetings supports the US Dollar.
- The RBA keeps the door open for further interest rate hikes.
The AUD/USD pair is down 0.22% lower to near 0.6980 during the European trading session on Thursday. The Aussie pair has come under pressure as the US Dollar (USD) trades firmly on expectations that the Federal Reserve (Fed) will hold interest rates steady in the next two policy meetings in March and April.
At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades firmly near an over-a-week high of 97.80.
Fed dovish speculation remains choked as the United States (US) inflation has remained well above the central bank’s 2% target. On Wednesday, Fed Governor Lisa Cook also signaled that monetary policy adjustments are inappropriate unless price pressures start cooling down. “It is the right time to sit back and wait to see what happens,” Cook said.
Meanwhile, the Australian Dollar (AUD) is broadly upbeat as the Reserve Bank of Australia (RBA) has signaled that interest rates could be raised further to tighten its grip on accelerating price pressures.
AUD/USD technical analysis
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AUD/USD trades lower at around 0.6982 during the press time. The 20-day Exponential Moving Average (EMA) rises steadily, underscoring a firm bullish trend. Price holds above the 20-day EMA, with the 20-day EMA at 0.6884 providing initial support.
The 14-day Relative Strength Index (RSI) at 66 (bullish) has eased from prior overbought readings, keeping momentum positive.
Upside would extend while the pair holds above the rising average, with pullbacks expected to be contained by trend support. RSI below 70 signals manageable momentum; a renewed push into the overbought band could fuel continuation, while fading impulse would open room for mean reversion toward the moving average.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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