AUD/USD hit 3-1/2 month low as 2-yr T-yield strengthened after the Fed decision

The AUD/USD extended losses to a 3-1/2 month low of 0.7440 after Fed’s upbeat comments on inflation pushed the 2-yr yield higher to 1.302%; the highest levels since March 29.

Q1 economic weakness is transitory - Fed

The Fed policy statement revealed the policy makers see first quarter economic weakness as being transitory. This should not come as a surprise as policy makers had made it clear via their public appearances that they weakness isn’t serious enough to warrant a change in the outlook.

Meanwhile, the statement also took note of the continued labor market strength and said the inflation has moved closer to the Fed’s 2 % goal. The Fed’s take on inflation pushed the 2-yr yield, which mimics rate short-term inflation/rise expectations, higher.

The Aussie dollar was already trading on the back foot largely due to the 3.4% drop in the copper prices.

AUD/USD Technical Levels

A break below 0.7407 (weekly 100-DMA) would open up downside towards 0.7311 (Nov low) and 0.7300 (zero levels). On the higher side, breach of 0.75 (zero levels) could yield a re-test of 0.7553 (200-DMA). A daily close above the same would revive the bullish view and open doors for 0.7610 (Apr 17 high). Note, the daily RSI has failed yet again to cut through 50.00 levels and is now sloping downwards, suggesting more losses ahead.