AUD/USD drops to multi-month lows on post-Fed USD strength, 0.74 in sight

The AUD/USD pair quickly faded the knee-jerk spike following the Fed decision and lost more than 40 pips. The pair fell to its lowest level since mid-January at 0.7420 and is now trading at 0.7426, down 110 pips, or 1.45%, on the day.

The selling pressure on the pair seems to be aggravated by the recent greenback strength, which was fueled by the optimistic tone seen in the FOMC's monetary policy statement. A couple of minutes ago, the US Dollar Index reached its highest level since the negative opening gap after the first round of French presidential election at 99.20 and is now gaining 0.38%, at 99.16. Furthermore, stops may have been triggered below 0.7440, weighing further down on the pair.

The U.S. Federal Reserve kept interest rates unchanged on Wednesday and emphasized on the strength of the labor market in its statement, ignoring the latest weak employment data and the dismal first-quarter economic growth rate. The Committee pointed out that it assesses the slowdown in growth during the first quarter as likely to be transitory.

• Comparison Between May and March FOMC Statements - Nomura

Technical outlook

The pair faces the first near-term support at 0.7400 (psychological level) before 0.7350 (Jan. 11 low) and 0.7290 (Jan. 6 low). To the upside, resistances could be seen at 0.7500 (psychological level), 0.7545 (200-DMA) and 0.7585 (100-DMA).

• Maybe the FOMC don't 'have' what it takes and AUD/USD will fly again, eventually? - Nomura