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More Volatility Expected Amid Banking

The biggest catalyst for the AUD/USD price will be the upcoming decision by the Federal Reserve scheduled for Thursday. 

  • Buy the AUD/USD pair and set a take-profit at 0.6825.
  • Add a stop-loss at 0.6600.
  • Timeline: 1 day.
  • Sell the AUD/USD pair and set a take-profit at 0.6600.
  • Add a stop-loss at 0.6800.

The AUD/USD moved sideways on Monday as traders prepared for another busy week in the financial market. The pair was trading at 0.6700, which was higher than last week’s low of 0.6568. The focus among traders will be on the upcoming RBA minutes, the Federal Reserve interest rate decision, and the banking sector.

The Australian dollar moved sideways as fear continued spreading in the financial market. During the weekend, Swiss authorities worked to engineer the rescue of Credit Suisse, the second-biggest bank in the country. UBS, the biggest bank in the country offered to buy it in a $1 billion deal, which was lower than where it closed on Friday.

There are still concerns about the US regional bank industry. On Friday, shares of First Republic Bank sank by double-digits even after the biggest banks in the country decided to deposit $30 billion in the company. These deposits were meant to offset the funds that are leaving the company. Therefore, there are elevated fears of contagion in the sector.

The biggest catalyst for the AUD/USD price will be the upcoming decision by the Federal Reserve scheduled for Thursday. This will be an important decision because of the state of the market. Data published last week showed that the country’s inflation remained above 6% on a year-on-year basis.

Therefore, while the bank may want to continue hiking, the risk of breaking things remains significantly high. As such, there is a likelihood that the bank will take a balanced tone and hike by 0.25%. That will be lower than the 0.50% that Jerome Powell hinted at earlier this month.

The Reserve Bank of Australia will publish its minutes on Tuesday morning. Because of the current market conditions, the impact on the AUD/USD pair will be a bit limited.

The AUD/USD exchange rate has drifted upwards in the past few days. It is trading at the important resistance point at 0.6700, which is a psychological point and the lowest point on February 27. The price is also along the 23.6% Fibonacci Retracement level.

It has moved slightly above the 25-period and 50-period exponential moving averages (EMA). The Relative Strength Index (RSI) is approaching the overbought level while the MACD has moved above the neutral level.

Therefore, the pair will likely be extremely volatile on Monday. A move above the 38.2% Fibonacci Retracement point at 0.6785 is possible.


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