AUD/USD defends 0.7100 after Fed showdown, focus shifts to US GDP

• AUD/USD licks Fed led wounds after declining the most in a week.
• Fed matched upbeat market expectations by signaling faster rate hikes, Powell sounds cautiously optimistic.
• Reuters’ poll suggests RBA will terminate bond-buying in February, lift the rates in November.
• Light calendar in Australia after a day off, US Durable Goods Orders, Advance Q4 GDP is crucial for near-term direction.

AUD/USD braces for the second consecutive weekly fall, despite bouncing off 0.7100, as Fed played by rules to match upbeat market expectations.

That said, the risk barometer pair dropped the most in a week by the end of Wednesday as Fed backed faster rate hikes and monetary policy normalization. However, the quote took a U-turn from 0.7095 to recall 0.7120 level on early Thursday morning in Asia.

The US Federal Reserve (Fed) kept benchmark interest rates and tapering targets intact during Wednesday’s Federal Open Market Committee (FOMC) meeting. However, the interesting part from the Monetary Policy Statement was, “The Committee expects it will soon be appropriate to raise the target range for the federal funds rate.”

Fed Chairman Jerome Powell also spoke in sync with the hawkish signals from the US central bank while saying, “There’s plenty of room to raise rates.” Though, his comments like, “The rate-hike path would depend on incoming data and noted that it is ‘impossible’ to predict,” seemed to have underpinned the AUD/USD rebound from 0.7095.

While following the Fed’s hawkish signals Fed and mostly upbeat comments from Powell, equities and commodities dropped whereas the US 10-year Treasury yields rose the most in three weeks, up eight basis points (bps) to 1.87% by the end of Wednesday’s North American session. The same mood propelled the US dollar.

It’s worth noting, however, that upbeat polls for the Reserve Bank of Australia (RBA), suggesting an end to the Quantitative Easing (QE) in February and wait for November for the rate lift-off, seems to have underpinned the AUD/USD rebound. The reason for the hawkish poll could be linked to the recent strong employment and inflation data from Australia.

“Economists canvassed in a Reuters Jan 18-25 poll also brought forward their rate hike expectations for the third month in a row. Most of the 34 respondents, however, expect the RBA to take more time, with a median forecast for a 15 basis-point move in November. Economists were less divided on when the central bank will pull the plug on its bond-buying program, with 17 out 22 of those who answered the question expecting an announcement at the next policy meeting on Feb. 1,” per Reuters.

That said, AUD/USD traders may now wait for more clues to extend the latest rebound from 0.7095. In doing so, the risk catalysts like Ukraine-Russia tussles and Sino-American tensions may play a notable role. However, more important will be today’s first readings of the US Q4 GDP and Durable Goods Orders for December.

Read: US GDP Preview: Inflation component could steal the show, boost dollar, already buoyed by Russia

Technical analysis

Multiple lows marked since August 2021 restricts short-term AUD/USD declines around 0.7100. However, a sustained trading below the 50-DMA level near 0.7180 joins bearish MACD signals to keep sellers hopeful.

That said, the pair buyers remain worried until witnessing a clear break of the 100-DMA, around 0.7270 at the latest.