AUD/USD testing key trend line support ahead of FOMC

• AUD/USD meeting trendline support.
• AUD/USD awaits FOMC.

AUD/USD has dumped in a broad based rally in the greenback as we await the FOMC outcome while this will be Yellen's last. Currently, AUD/USD is trading at 0.8068, down -0.13% on the day, having posted a daily high at 0.8118 and low at 0.8046.

Once again, the Aussie is testing the downside support of the Aussie's rally from 0.7880, albeit making a higher low on the hourly chart thus far. The softer than expected CPI data dip was bought back from 0.8046 and 0.8116 ahead of resistance 0.8125.40 has been effective.

Analysts at TD Securities broke down the  data as follows:

"Dec qtr core CPI rose by +0.42%/qtr and remained steady at 1.87%/yr, consistent with the median forecast of 1.85%/yr.  TD expected more 2-handles for the three CPImeasures, so was mildly disappointing.  More importantly, the report did not challenge the RBA’s November projection of 1¾%/yr by end-2017.  Our May hike is under review, but today’s report wasn’t enough.  Markets to wash around again waiting for the crucial WCI released on 21 Feb (Wed).  

CNY Manufacturing PMI for Jan was 51.3 (vs market: 51.6) more in line with TD (51.4) due to air pollution crackdown, deleveraging and slump in the property market all hitting the industrial output in early 2018.   In contrast, services PMI surged to 55.3."

In respect of the Fed, the market is expecting a hawkish hold as the most likely outcome from the FOMC meeting.  Analysts at BBH argue that growth impulses are stronger, even though headline Q4 GDP disappointed.  "The part of the economy that is the most responsive to monetary policy, final domestic purchases, rose by a robust 4.8%.  The IMF recently raised its US growth forecasts, and we would expect the Fed to follow suit."

AUD/USD levels

Technicals are still coming with a bullish bias with the consolidation period with monthly RSI still positive. The 0.81 handle remains congested with offers. The 200-month SMA at 0.8052 is guarding a break of 0.8000. This level guards the January 9&10 lows at 0.7809 ahead of the 200 D SMA at 0.7739.