AUD/USD turns positive, climbs above 0.7100 after Fed’s decision, as Powell speaks
- AUD/USD snaps three days of losses as the Federal Reserve increased rates by 25 bps.
- Federal Reserve officials stated that more increases would be appropriate.
- US central bank policymakers decided that future rate hikes would be in 25 bps increments.
AUD/USD pares some of its earlier losses, aiming higher after the US Federal Reserve (Fed) lifted rates by 25 bps as expected by market participants, though emphasized that further increases would be appropriate, putting expectations for a Fed pivot in the backseat. At the time of writing, the AUD/USD is trading volatile in the 0.7040-0.7115 range.
Remarks of the Federal Reserve’s monetary policy statement
On Wednesday, the Federal Reserve policymakers decided unanimously to hike rates by 0.25%, lifting the Federal Funds rate (FFR) at around 4.50% - 4.75%. Additionally, they pushed back against the market’s expectations for a Fed pivot and said additional rate hikes would be appropriate. Policymakers forward guided the market, adding that future rate hikes would be in 25 bps increments, dropping the reference to the “pace” of additional rate hikes.
Fed officials acknowledged that inflation has “eased somewhat but remains elevated.” Participants added that indicators point to modest growth in spending and production and commented that the labor market remains robust. Fed members stated, “in determining the extent of future rate hikes, it will take into account cumulative tightening, policy lags and economic and financial developments.”
Now that the Fed’s decision is in the rearview mirror, traders can for the Federal Reserve Chair Jerome Powell’s press conference here: Fed Press Conference: Chairman Jerome Powell speech live stream – February 1
AUD/USD reaction to the headline
The AUD/USD 15-minute chart portrays the pair trading nearby a busy confluence of the 20, 50, 100, and 200-Exponential Moving Averages (EMAs). Even though AUD/USD’s price action remains volatile due to the importance of the Fed’s decision, it failed to crack the day’s low at 0.7036. Also, it’s aiming toward printing a new session high above the 0.7100 area, testing the R2 daily pivot point at around 0.7115-20. The break above will expose the 0.7200 mark.
On the flip side, the AUD/USD first support level would be the daily pivot at 0.7034, followed by the S1 pivot at 0.7000.