AUD/USD rises ahead of Federal Reserve’s decision as Wall Street pares gains

• AUD/USD remains in the green despite market sentiment shifting neutral.
• Traders are eyeing the Fed’s decision, updated projections, and Powell’s press conference.
• On Thursday, the Aussie’s docket will feature jobs data.

The AUD/USD rises in the middle of the North American session by 0.32%, while Wall Street trims its earlier gains as we get closer to the Federal Reserve’s decision. At the time of writing, the pair is trading at 0.6577 after bouncing off a low of 0.6541.

AUD/USD meanders around the 200-DMA awaiting for Powell and Co

US equities paired their earlier gains as traders prepare for Jerome Powell and his colleagues, which are expected to keep the federal funds rate (FFR) unchanged at around 5.25% - 5.50%, though they will reveal its projections for the next year. Money market futures had priced that the Fed would cut rates four times, each by 25 basis points, but the latest estimates by Fed officials foresaw only two cuts for the next year.

Besides that, traders would be looking for the Chair Powell press conference, in which he’s expected to push back against easing monetary policy as the markets project while refraining from saying that policy is already restrictive, keeping the door open for further tightening.

On the Australia front, Consumer Sentiment in December improved while investors prepared for the release of employment data on Thursday’s session. On Wednesday, Australia’s Treasurer Jim Chalmers projected a budget deficit of A$1.1 billion in the year to end June 2024, down from A$13.9 billion estimated in May.

Given the backdrop, if the Fed strikes a hawkish tone and market participants buy it, the AUD/USD could drop below the 0.6500 figure and extend its losses to the confluence of the 50 and 100-day moving averages (DMAs) at 0.6458/59. Otherwise, the pair could extend its gains past the 200-DMA.

AUD/USD Price Analysis: Technical outlook

The AUD/USD is neutral to upward biased, once buyers reclaimed the latest cycle high at 0.6522, but it faced strong resistance at around 0.6700, which sent the pair into a tailspin, toward 0.6520. Since then, the game’s name is consolidation. But the Fed’s decision, could give direction for the reminder of the year. Upside risks lie above 0.6600, while a drop below 0.6500, would likely exposed the 0.6450 area and below.