Fed dropped US currency

06 may 2022 115
Volkov_Anton
Volkov_Anton

Listed among the best MarketCheese authors
1st in the segment "Currencies"
2nd in the segments "Indices" and "Metals"
3rd in the segment "US stocks"
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The AUDUSD pair spent a period from April 5 to May 3 in a steady downward trend. As it was expected, the reassurance on monetary tightening made by Australian regulator officials wasn’t enough to keep the AUDUSD on the year top, from which it has declined by more than 8%.


But now the Reserve Bank of Australia has finally gone into action, supporting the national currency. The key rate has been increased by 0.25% to 0.35% (initially the planned increase was only by 0.15%). The future prospect of the further increase has also been clearly stated, and the balance of the Australian regulator will also be gradually reduced. 


At the meeting on May 4, according to the expectations, The Federal Reserve System raised the rate by 0.5% to the level of 0.75% - 1%. The start of balance reduce was announced - since June bonds will be sold in the amount of $47.5 billion a month, and since September the sales volume will be doubled to $95 billion. There also were some unexpected revelations, that caused a dramatic decline of dollar value relative to all other world currencies.


The main news was the Jerome Powell’s statement on further raising the rate by the same amount of 0.5% during the following meetings. The market participants are concerned with the possibility of even more aggressive actions of the Fed and the further rate increase by 0.75% already in June. After the press conference, the forecast of the interest rate was significantly lowered: from 3.25% - 3.5% to 2.25% - 2.5%.


A softer rhetoric of the Fed, both at the March 16 meeting and at the last one, led to the considerable fall of the US dollar and the rise of other world currencies, including the AUDUSD pair. A reversal has shaped on the daily chart, which was proved by the inverted hammer pattern and a reversal of the RSI from the oversold area upwards. After the rapid growth by 2.3% a pullback is happening yesterday, which might be used to open a position with the expectation of the further short-term growth of the AUDUSD pair.



The following trading strategy is possible:


Buy AUDUSD within a range of 0.71-0.72. Take profit 1 – 0,727. Take profit 2 – 0,7344. Stop loss – 0,703.


Traders also can use at their own will a Trailing stop instead of a fixated Stop loss if the price goes up.

Volkov_Anton
Volkov_Anton

Listed among the best MarketCheese authors
1st in the segment "Currencies"
2nd in the segments "Indices" and "Metals"
3rd in the segment "US stocks"
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