The Federal Reserve officials are expected to keep the current interest rates unchanged at their two-day policy meeting this week. However, they are likely to signal a potential rate cut in September. Economists predict that the Fed will maintain the benchmark rate at a range of 5.25% to 5.5%. Given recent lower inflation readings and a slight increase in unemployment, the Fed is expected to acknowledge progress towards their 2% inflation target. Fed Chair Jerome Powell is anticipated to provide cautious indications of future rate cuts, emphasizing data-dependent decision-making and addressing concerns about the labor market. Investors are expecting possible rate cuts in September, November, and December.
Overview
The Federal Reserve officials are expected to keep the current interest rates unchanged at their two-day policy meeting this week. However, they are likely to signal a potential rate cut in September. Economists predict that the Fed will maintain the benchmark rate at a range of 5.25% to 5.5%. Given recent lower inflation readings and a slight increase in unemployment, the Fed is expected to acknowledge progress towards their 2% inflation target. Fed Chair Jerome Powell is anticipated to provide cautious indications of future rate cuts, emphasizing data-dependent decision-making and addressing concerns about the labor market. Investors are expecting possible rate cuts in September, November, and December.
Key Economic Events
Wednesday 12:15 (GMT+0) - USA: ADP Nonfarm Employment Change (USD)
Wednesday 12:30 (GMT+0) - Canada: GDP y/y (CAD)
Wednesday 14:00 (GMT+0) - USA: Pending Home Sales m/m (USD)
Wednesday 18:00 (GMT+0) - USA: Fed Interest Rate Decision (USD)
Wednesday 18:30(GMT+0) - USA: FOMC Press Conference (USD)
Thursday 11:00(GMT+0) - UK: BoE Interest Rate Decision (GBP)
Thursday 14:00 am (GMT+0) - USA: ISM Manufacturing PMI (USD)
Friday 12:30 am (GMT+0) - USA: Nonfarm Payrolls (USD)
Technical Analysis
The exchange rate between the Australian Dollar and the US Dollar has been declining since reaching a daily high of $0.67986 on July 11. Over the following three weeks, it has consistently hit lower lows and lower highs. A recent bearish swing on the daily price chart indicates the potential for further decreases in the exchange rate. Specifically, the peak at 0.65684 failed to surpass the previous peak, and prices dropped below the low point at 0.65100, confirming the bearish swing. Both the 50-period Exponential Moving Average (EMA) and the Momentum oscillator support this negative outlook for AUDUSD. Prices have fallen below the EMA, and the Momentum oscillator values are below the 100 baseline. Additionally, the Relative Strength Index crossing below the oversold area serves as a warning signal.
Potential Upside Targets
If the bulls manage to take control of the market, traders may consider the following four potential upside targets:
0.65684: The first price target is 0.65684, which matches the peak of the latest swing.
0.66017: The price target for the second objective is 0.66017, reflecting the 38.2% Fibonacci Retracement between 0.67986 and 0.64739.
0.66773: An additional resistance level is set at 0.66773, corresponding to the 61.8% Fibonacci Retracement of the recent decline.
0.67075: The fourth price target is positioned at the internal trendline of 0.67075, marked on July 19.
Potential Downside Targets
If the bears manage to maintain control of the market, traders may find potential opportunities in the following three downside targets:
0.64794: The initial level of support is identified at 0.64794, corresponding to the daily low marked on July 31.
0.64155: The second downside target is expected to be 0.64155, which corresponds to the 261.8% Fibonacci Extension of the latest swing.
0.63210: The third line of support is estimated at 0.63210, which aligns with the 423.6% Fibonacci Extension attached to the swing.
Conclusion
In short, it is expected that the Federal Reserve will keep the current interest rates at their next meeting, but they may indicate potential rate cuts in September. This decision is influenced by recent lower inflation and rising unemployment. Investors anticipate that there will be rate reductions in the next few months, reflecting a cautious yet responsive approach from the Fed. Additionally, important economic events such as employment data and GDP figures will provide more insights into the economic health. The technical analysis of the AUDUSD exchange rate suggests a bearish trend, supported by moving averages and momentum indicators, with defined potential upside and downside targets for traders.