- AUD/USD is approaching a key psychological barrier as trade uncertainty grows.
- The Federal Reserve’s stance solidifies expectations for interest rate cuts in September, amid worries about inflation from tariffs.
- The US dollar is under renewed pressure from policy and trade uncertainties compared to the Australian dollar.
The Australian Dollar (AUD) is trading in a clearly defined pattern against the US Dollar (USD) on Wednesday, as the market processes recent Fed announcements and new tariff-related news.
These tariffs are set to commence in August, yet ongoing trade uncertainty continues to impact the value of the greenback. A customs letter was sent out on Wednesday to various countries, including Libya, Iraq, and the Philippines.
Currently, AUD/USD is trading around 0.6540, facing a resistance point at 0.6550.
The Federal Open Market Committee (FOMC) from June has indicated that many policymakers are hesitant about reducing interest rates prematurely. Nonetheless, there is a recognition that tariffs could heighten inflationary pressures.
On Tuesday, President Trump called for the resignation of Federal Reserve Chairman Powell, asserting that he should replace those inclined to lower interest rates. At the White House, Trump reiterated that the US should ideally have “the lowest interest rate in the world.”
Despite the ongoing political discussions, the CME FedWatch tool continues to show expectations for interest rate cuts in September. Because these forecasts are more or less priced in, AUD/USD has shown limited reaction to the Fed’s report.
The widening wedge pattern limits AUD/USD price movement
AUD/USD is trading at nearly 0.6540, with resistance aligning at 0.6550, coinciding with the 61.8% Fibonacci retracement from September to April.
Presently, the price remains within a growing rising wedge formation. This pattern showcases a series of peaks and higher lows, extending towards the upper boundary.
The pair is just below the wedge limit, with support clustered near the 50-day exponential moving average around 0.6476 and the 200-day EMA at 0.6437.
The recent Golden Cross, crossing above the 200-day EMA, supports a positive mid-term outlook.
Moreover, the relative strength index (RSI) is nearly at 54, suggesting a slight bullish stance above the neutral 50-level.
AUD/USD Daily Chart
A breakout above 0.6550 would confirm bullish momentum, likely drawing further buying interest. In this case, the next target could be the psychological mark of 0.6600, with a potential advancement toward November’s high of 0.6688.
On the other hand, a dip below 0.6470 may indicate a weakening of bullish pressure, implying a possible negative reversal within the wedge structure. This could lead to deeper support at 0.6428, near the 50% Fibonacci level, raising downside risks toward the 200-day EMA of 0.6437.
