Good day forex traders and readers.
Welcome to another edition of our weekly AUD/USD forecast. I hope everything is fine for you. This week saw one of my family member fallen ill. I hope everything will turn out ok.
In the previous AUD/USD forecast we noted that the currency pair did not manage to breach the resistance of 0.9140. As expected, it was testing the support of 0.9. Should the support fail, we might be looking at 0.8880. Any bullish momentum would need to overcome 0.9140 before targeting the extended bullish target of 0.93.
Looking at the AUD/USD daily chart above we note that the currency pair stayed within the channel of 0.9 and 0.9140. Having a strong technical basis is of paramount importance in trading. I am glad that my support and resistance lines often impact the price action.
If the 0.9140 resistance falls, we may expect a bullish target of 0.93 followed by 0.95.
A bearish breakdown below 0.9 will probably see 0.8880 next.
Besides the international focus on the Crimea crisis this week, many investors have also taken notice of the US Federal Reserve. Tapering of the quantitative easing measures continued with a further reduction of $10 billion bringing the amount down to $55 billion. The stimulus is on track to end later this year.
While most of the market have already factored this in, the development that came as a surprise was the increased prospect of an interest rate hike. The US Federal Reserve chairperson was reported as mentioning that an interest rate hike may happen 6 months after the end of quantitative easing. This raised expectations to a US Federal Reserve Fund Rate of 1% by the end of 2015.
A two fold sentiment impact is probably underway. An increased demand for US dollar in view of better interest prospect and also a concern of excessive market tightening due to the removal of cheap money.
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