FED MINUTES
The U.S. dollar, as measured by the DXY index, was modestly higher on Wednesday, attempting to end a 5-day losing streak. Against this backdrop, both EUR/USD and AUD/USD traded with a negative bias, unable to sustain their recent upturn in a sign perhaps of market exhaustion.
In other developments, the publication of the FOMC minutes did not significantly impact the dynamics of the trading session, even though it echoed a more dovish tone. For context, the record of the last Fed meeting showed that officials agreed to proceed carefully and that risks to the mandate have become two-sided. This choice of language implies a likelihood that the central bank will adopt a more cautious approach, setting a higher threshold for any future interest rate increases. In the grand scheme of this, this could be somewhat bearish for the U.S. dollar in the fourth quarter.
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EUR/USD TECHNICAL ANALYSIS
EUR/USD has rebounded in recent days after falling below the 1.0500 level and reaching its weakest point since December 2022 last week. In this context, the pair has recaptured the 1.0600 handle, moving ever closer to the channel resistance at 1.0615. The bulls may struggle to breach this barrier, but a clean breakout could pave the way for a rally towards 1.0765, the 38.2% Fibonacci of the July/October decline.
On the flip side, if market sentiment shifts back in favor of sellers and prices reverse lower from its current position, primary support rests in the 1.0500/1.0465 range. While the pair may establish a foothold in this area during a pullback, a rupture of this foundation could amplify downward momentum, setting the stage for a move towards 1.0365. On further weakness, the focus will be on 1.0225.
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EUR/USD TECHNICAL CHART
EUR/USD Chart Created Using TradingView
AUD/USD TECHNICAL ANALYSIS
AUD/USD plunged below 0.6300 last Tuesday, touching its lowest level since November 2022. Sentiment, however, improved in the following days, allowing the pair to stabilize and mount a recovery, as seen in the chart below, where prices can be seen touching the 50-day simple moving average above 0.6400 earlier this week.
Despite the rebound observed in the past days, price action remains unfavorable, with the recent rejection from trendline resistance being a key bearish signal. For context, the pair probed a major downtrend line in the overnight session in the vicinity of 0.6445, but was quickly repelled to the downside, allowing sellers to regain the upper hand.
From here, there are two possible scenarios to keep in mind. If AUD/USD extends lower, support is seen at 0.6350. AUD/USD may find stability in this area on a pullback, but in the event of a breakdown, a retest of the 2023 lows is likely. The other possibility involves a rebound from the current levels. Should this scenario play out, we could see a move towards 0.6440/0.6460. Upside clearance of this ceiling could open the door for a rally towards 0.6510.
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