AUD/USD consolidates around 0.7250 ahead of the FOMC

• The Australian dollar consolidates at 0.7250 after pulling back from 0.7275.
• The positive market sentiment has favored the aussie against the US dollar.
• AUD/USD might retreat towards 0.7100 on a hawkish Fed – Westpac.

The Australian dollar has seen some positive price action during the Asian and European sessions to extend its recovery from 0.7180 lows. Later on, the pair has been capped at 0.7275 before consolidating around 0.7250 as the market braces for the Federal Reserve’s Monetary policy decision.

The USD has lost ground on a risk-on session

The more positive market sentiment, triggered by hopes of progress in the Russia – Ukraine peace talks and the Chinese Government’s announcement of a new set of economic stimulus measures, has boosted the market mood, which has favored the Australian dollar.

Equity markets in Asia and Europe have posted solid gains on Wednesday, while the major US indexes remain positive with all eyes on the US Central Bank's Monetary Policy Committee.

The Federal Reserve is widely expected to hike interest rates for the first time since 2018 in order to ease the highest inflation in four decades. The focus, however, will be on the ensuing statement and on the bank's plan to bring prices under control without hurting the economic growth.

AUD/USD to dip towards 0.71 on hawkish Fed – Westpac

The FX Analysis team at Westpac expects the pair to pull back about 150 pips from current levels on the back of a hawkish Fed statement: “Near-term, risks lie towards the 0.7100 area, with the US dollar benefiting from both haven/liquidity demand and what should be a hawkish tone from the FOMC as it delivers the first of many rate rises.” 

Technical levels to watch