**US Dollar Rebounds After Fed, Spotlight Turns to AUD/USD and GBP/AUD**
*Adapted and expanded from Justin McQueen’s article on Forex Factory*
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The US dollar’s performance has recently taken center stage within the global currency markets, particularly following the outcomes of the June Federal Reserve (Fed) meeting. As investors recalibrate their positions across major currency pairs, attention is now shifting toward the dynamics of the Australian dollar (AUD), with specific focus on both AUD/USD and GBP/AUD. This article delves into the recent price action, assesses the core drivers at play, and explores the technical and fundamental factors influencing these pairings.
## Post-FOMC US Dollar Reversal
The Federal Reserve’s monetary policy decisions are key market-moving events that reverberate through the forex market. Following the June meeting, the US dollar’s trajectory initially weakened as markets digested a somewhat less hawkish than anticipated economic outlook. However, this softness proved to be temporary.
**Events Triggering the US Dollar Rebound:**
– The Fed left interest rates unchanged, aligning with broad market forecasts.
– While the central bank maintained its data-dependent guidance, updated economic projections (the “dot plot”) suggested a likely reduction to just one rate cut by year-end, compared with the three penciled in at the last forecast.
– The Fed’s expectation of more persistent inflation and resilience in labor markets led market participants to reconsider their aggressive rate cut expectations.
**Market Reaction:**
Shortly after the FOMC meeting and subsequent commentary by Fed Chair Jerome Powell, broad-based selling of the US dollar began to reverse. The Dollar Index (DXY), which tracks the dollar against a basket of major currencies, began to rise, unwinding much of its initial decline.
## Technical Picture: DXY (US Dollar Index)
The DXY had slipped below 105.00 following the Fed’s statement but soon recouped losses, rising back above this significant psychological and technical support.
### Key Technical Factors Supporting the Dollar:
– The DXY respected its 200-day Simple Moving Average, a sign that near-term bullish momentum remains intact despite the volatility around the Fed.
– Technical resistance lies near the 105.80-106.00 zone, a region closely watched by technical traders.
– Short-term momentum oscillators (such as RSI and MACD) suggest there is potential for further upside if this zone is convincingly breached.
## Fundamental Drivers: US Dollar Strength
Several core themes continue to support the US dollar:
– The ongoing resilience in US economic growth, underpinned by strong labor markets and robust consumer spending.
– Sticky core inflation readings, particularly in services, have convinced the Fed to maintain a cautious stance.
– Rising geopolitical tensions and risk aversion have prompted inflows into the greenback, which is seen as a safe-haven asset during periods of uncertainty.
## AUD/USD: What’s Driving the Australian Dollar?
The Australian dollar is especially sensitive to China’s economic health
Read more on AUD/USD trading.