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Their fear is that the Fed may be doing it too fast, too soon since this is the most aggressive that the bank has been in decades.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6100.
- Add a stop-loss at 0.6345.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6320 and a take-profit at 0.6450.
- Add a stop-loss at 0.6250.
The AUD/USD price remained in a consolidation phase after the Federal Reserve published minutes of its previous meeting. It was trading at 0.6286 on Friday as investors refocused on the upcoming American inflation data.
Fed minutes and US inflation
The Federal Reserve published minutes of its past meeting in the overnight session. These minutes showed that the members committed to continuing with the restrictive policies they have embraced in the past few months.
During that meeting, the Fed officials decided to hike interest rates by 0.75% for the third straight time. As a result, they brought the official cash rate to between 3% and 3.25%. However, the minutes showed that some members worried that it would be necessary to calibrate risks.
Their fear is that the Fed may be doing it too fast, too soon since this is the most aggressive that the bank has been in decades. Others said that an aggressive policy was needed to prevent high inflation to be embedded in the economy.
The Fed minutes came a few hours after the Bureau of Labor Statistics (BLS) published the latest producer price index (PPI) data. The figure showed that the PPI rose by 0.4% after falling by a seasonally-adjusted 0.2% in August. It rose by 8.5% on a year-on-year basis.
The US will publish the closely-watched consumer price index (CPI) data on Thursday. Economists believe that the headline CPI pulled back slightly in September as gasoline prices declined. However, excluding the volatile food and energy prices, analysts believe that inflation rose by 200 basis points in September.
The US will also publish the latest real earnings and real spending numbers that factor-in inflation. Also, the Bureau of Labor Statistics will release the latest initial and continuing jobless claims numbers.
AUD/USD forecast
On the three-hour chart, we see that the AUD/USD price has been in a tight range recently. This consolidation happened when the pair tested the second support of the standard pivot point. It remains below the important support level at 0.6365, which was the lowest level on September 28.
The pair has moved below the 25-day moving average while the MACD has formed a bullish divergence. Still, the pair will likely have a bearish breakout as sellers target the third support at 0.6100. The stop-loss for this trade will be at 0.6345.
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