Title: AUD/USD holds comfortably above 0.6400 mark as traders await FOMC decision
November 02,2022 06:30 AM ET
The AUD/USD pair regains some positive traction on Wednesday and maintains its tone during the first half of the European session. The pair is currently hovering near the upper end of its daily trading range around the 0.6425–0.6430 region and remains at the mercy of US dollar price dynamics.
Speculation that the Federal Reserve will soften its hawkish stance amid signs of a slowdown in the US economy is keeping dollar bulls on the defensive. The Australian dollar, meanwhile, is underpinned by the fact that the Reserve Bank of Australia has pledged to keep raising interest rates to contain stubbornly high inflation, which is at 32-year highs. The combination of these factors is acting as a tailwind for the AUD/USD pair, although the intraday rally lacks bullish conviction.
Traders seem reluctant to make aggressive directional bets ahead of the key central bank event—the expected FOMC policy decision—to be announced this Wednesday. The U.S. central bank is expected to raise rates by 75 basis points for the fourth consecutive time. However, investors will be watching the accompanying monetary policy statement and Fed Chairman Jerome Powell's remarks at the post-meeting press conference for clues on the future path of rate hikes.
Meanwhile, concerns over potential economic headwinds stemming from China's strict zero COVID policy amid the resurgence of new cases could limit AUD/USD rallies. Moreover, the US ADP report on private sector employment may also fail to provide any impetus, warranting some caution from bullish traders. Therefore, it will be prudent to wait for strong follow-through buying before positioning for any further appreciation moves.