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18.08.2022: Bears to tighten their grip on AUD; outlook for USD, USD/JPY, AUD/USD

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The July FOMC minutes showed that all policymakers backed a 75 basis point rate hike. At the same time, they reckoned that the future rate increases would depend on macro stats. They also said that the regulator may slow down the pace of monetary tightening if necessary.
Investors perceived this comment as a hint that the tightening cycle may be less aggressive than predicted. Yet, Fed officials confirmed once again that the central bank would raise the interest rate until inflation reaches its target level.
Following the release of the minutes, investors began to price in a 50 basis point rate hike in September. This probability was estimated at 60%. Today, these expectations may change as speeches of Fed officials could give traders new food for thought.
The US dollar index is gaining momentum. Yet, the bulls remained slightly cautious right after the publication of the minutes. In the Asian session, the greenback was trading mostly at the same level. However, it made attempts to rise higher.
A short-term target is located at 107.00. However, the US dollar has no drivers to touch this level and consolidate above it. If it breaks through this level, it could advance to 107.42.
Nevertheless, there are no bearish fundamental factors for the US dollar now. It is expected to trade steadily until the end of the year. Risk aversion is likely to persist in the long term, which is extremely beneficial for the US dollar.
Tensions over Taiwan are mounting. Several warships remain near the island. Reportedly, the US and Taiwan will start formal talks on a trade and economic initiative in the fall.
Reputable think tanks slashed China’s growth forecast. Bloomberg revised its outlook. Goldman Sachs Group lowered its projection for China's GDP to 3% from 3.3%. Nomura downgraded the figure to 2.8% from 3.3%. Thus, the forecast readings are now quite far from the government's target level of 5.5% set for this year. It increases the risks of a global recession.
The yen/dollar pair remained almost unchanged in the Asian trade. Looking at the chart, the dominance of the US dollar is clearly seen. Now, the pair’s trajectory mainly depends on the greenback’s movements. So, the upward trend is likely to continue.
On Wednesday, the pair almost reached the short-term target level of 135.60. However, it failed to consolidate above this level. If the bullish bias for the greenback gets stronger, the pair is sure to rise above this level in the short term.
A more distant target for the bulls is now the 140.00 level.
The main drivers remain the same - the prospects for the global economy and the energy crunch in the eurozone.

Today, Australia revealed its employment data. July is a seasonally strong month for the labor market. For this reason, many analysts predicted sharp growth in the number of new jobs. They were anticipating an increase of 50,000 or 40,000. The most pessimistic scenario suggested a rise of 20,000.
None of the forecasts turned out to be accurate. The indicator was rather weak. The employment rate went into negative territory as the number of new jobs plunged by almost 41,000. At the same time, the unemployment rate fell to 3.4% although analysts did not expect any changes.
The AUD/USD pair has been quite volatile this week. It halted its rise at 0.7146. The bulls failed to defend the 0.7000 level. It signals further decline.
The next target could be the 0.6868 level. If the price drops below this level, it may tumble to a low of 0.6680. If the bears escalate pressure, the quotes could even collapse to 0.6461, which is the correction level of the uptrend of 2020-2021. This is the most unfavorable scenario at the moment.
A breakout of a high of 0.7146 will signal a resumption of an uptrend. In this case, the pair may move to the June high of 0.7282.
However, a downtrend looks most likely over the next few months. Shrinking economic growth will force the RBA to carefully consider further steps regarding monetary policy. Traders have already factored in big rate increases. This is why the AUD/USD pair will hardly have any support even if the RBA maintains a hawkish stance.

00:00 Intro
02:27 USDX
03:52 USD/JPY
04:40 Australia Employment Rate, July
05:44 AUD/USD
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