AUD/USD: looking to the Fed for direction between 0.7150/0.73 - 0.7800

Currently, AUD/USD is trading at 0.7484, up 0.43% on the day, having posted a daily high at 0.7505 and low at 0.7431.

AUD/USD is probing the 0.75 handle with a rally in oil finally supporting the Aussie and risk on demand driven markets. WTI made a fresh high through the $54 handle and US stocks are making further highs in the Trump fuelled rally. The main event this week will come in the form of the FOMC.

The markets have fully priced in a rate hike, but should the Fed not hike, it does not necessarily mean the dollar will sell-off on any prolonged scale - it will very much depend on the outlook from the Fed, given the uncertainties on a macro and political scale with head-winds from a banking crisis in Europe and no telling how 2017 will pan out for the US economy under Trump's leadership and fiscal policies. Dot plot: what the Fed really think about the elections - Rabobank

The dollar has also been backed as a safe haven in risk-on play from a demand driven market in the US economy post Trump's victory. However, should the Fed hike, there could be an initial test of 0.7300 and recent lows in November, although coal and iron ore are more likely to sustain their dramatic rises during the months ahead, according to analysts at Westpac, lending support to the Aussie. However, trade, employment and inflation are a drag on the Aussie at the moment coupled with a contraction in Q3 GDP, exposing dovish risks in the RBA for 2017 Q1/H1. If not broken before, the 0.75 handle and 200 dma would likely give way on the Fed not hiking with 0.7780 the key target on the bull's radar.

AUD/USD levels

With spot trading at 0.7485, we can see next resistance ahead at 0.7490 (Daily Classic R1), 0.7498 (Yesterday's High), 0.7505 (Daily High), 0.7506 (Weekly Classic R1) and 0.7526 (Daily Classic R2). Support below can be found at 0.7480 (Weekly High), 0.7473 (Daily 20 SMA), 0.7470 (Hourly 20 EMA), 0.7463 (Daily Classic PP) and 0.7462 (Hourly 100 SMA). 0.7150 is the next key support on a break below 0.7300.