AUDUSD has formed lower highs and higher lows to consolidate inside a symmetrical triangle on its short-term chart. A breakout could be looming with the upcoming top-tier catalysts.
The pair is testing the triangle bottom, and a bounce might be due. After all, the 100 SMA is above the 200 SMA to indicate that the path of least resistance is to the upside or that support is likely to hold.
Stronger bullish pressure might even lead to a break of the triangle top around .73750 and a rally that’s the same height as the triangle. However, stochastic is on middle ground to reflect consolidation, barely offering any directional clues at the moment.
A break below support could similarly be followed by a drop of the same height as the triangle, which spans around 50 pips.
The upcoming FOMC announcement could be a catalyst for a big move, as any change in tone for the US central bank could have an impact on overall market sentiment.
In particular, a shift towards a more hawkish tone that suggests they could taper asset purchases soon might lead to a strong dollar rally. At the same time, the prospect of higher borrowing costs and lower stimulus could keep risk appetite in check, weighing on the higher-yielding Aussie.
On the other hand, sticking to their earlier cautious stance of keeping policy unchanged until they see stronger jobs data could weigh on the dollar.
Earlier today, Australia reported slightly stronger inflation data, with the headline reading advancing from 0.6% to 0.8% versus the 0.7% forecast. The trimmed mean CPI also rose from 0.4% to 0.5% as expected.
However, concerns about the extended lockdown measures in Australia could keep traders bearish on the currency, as this could derail the ongoing economic recovery. In turn, this could keep the RBA from tightening policy anytime soon.