AUD/USD surges towards 0.7250s ahead of FOMC decision

• The Australian dollar surged 0.77% amid an improved market mood.
• Russia-Ukraine hostilities persist, though discussions seem to progress.
• AUD/USD Price Forecast: Neutral, despite the 50 and the 100-DMA sitting below the exchange rate.

The Australian dollar rallies ahead of the second Federal Reserve monetary policy meeting, amid an improvement in talks between Russia-Ukraine, and a worse than expected US Retail Sales report. At the time of writing, the AUD/USD is trading at 0.7253.

Russia-Ukraine negotiations seem to have progressed

Meanwhile, talks between Russia and Ukraine appear to make substantial progress. Sources cited by the Financial Times said that both parties had made significant progress towards a potential 15-point peace plan that would include a ceasefire and Russian withdrawal from Ukraine. The deal includes that Ukraine would not join NATO and would not host foreign military bases.

Although it is a piece of positive news, the market barely reacted to it, as dip buyers entered since the beginning of the Asian session.

In the meantime, European and US equity indexes keep trading with gains, while in the FX space, most G8 currencies rally against safe-haven peers. The US Dollar Index, a gauge of the greenback’s value vs. six rivals, is down 0.50%, sitting at 98.56, ahead of the Federal Reserve monetary policy meeting.

In the economic docket, the Australian docket was absent. Retail Sales for February increased at a moderate pace in the US, though a tenth lower than foreseen, at 0.3% vs. 0.4% m/m. Sales excluding autos rose by 0.2%, lower than the 0.9% m/m. Noteworthy that data for January was revised higher to show sales surging 4.9% instead of 3.8% as previously reported.

Late in the day, around 18:00 GMT, the US central bank would reveal its monetary policy decision, widely expected to increase rates by 25 basis points. At the same time, AUD/USD trader’s eyes would also digest the Summary of Economic Projections (SEP), specifically the dot-plot, which could give forward guidance, on interest rates expectations by the board.

AUD/USD Price Forecast: Technical outlook

Overnight, the AUD/USD surged higher on an improved market mood, despite having the Fed’s monetary policy decision around the corner. The AUD/USD reacted higher from daily lows around 0.7180, but the rally stalled some pips short of the 38.2% Fibonacci level at 0.7260.

The AUD/USD bias remains neutral, despite trading above the 50 and 100-day moving averages (DMAs). Upwards, the pair would face solid resistance around 0.7260, followed by the 0.7303-14, where the 200-DMA and the January 13 daily high lie, and then March 10 daily high at 0.7367.

On the flip side, the AUD/USD first floor would be the 100-DMA at 0.7217, immediately followed by 0.7204, the 50% Fibonacci level, and the subsequent support would be March 15 daily low 0.7165.