Monday, September 16, 2013

Things look brighter in Australia this morning

The Australian dollar versus the US dollar (AUDUSD pair) has reached an important resistance level and shows every sign of breaching it, on the daily chart. As well as that, a well defined double bottom, which is a classical indicator of the probability that the way forward for the instrument concerned is up, is in evidence.

The 200 day Simple Moving Average, while sloping downward, still has some clear daylight between it and price. This leaves scope for a rise, at least as far as the 200 SMA.

On the fundamental analysis front, there seems to be a perception that things might not be that bad economically in Australia as was thought. China seems to have reached some type of a consolidation in its growth, which is good for the Aussie, and while unemployment figures were lower than expected for August, a six per cent rate is not to be sneezed at.  There was a decisive result in the elections just past, which is also good for the currency, at least in the short term.

Much will depend on the minutes of the Reserve Bank of Australia, which are due out on Tuesday.

In the USA, the news that Larry Summers, former Treasury Secretary in the Clinton government, and a noted hawk, who would presumably end Quantitative Easing (QE) quickly if he were selected, has actually withdrawn from the selection process for the new leader of the Federal Reserve, to succeed Mr. Bernanke, will tend to weaken the US currency.

The big event later this week is the meeting of the same Fed, which is expected to announce some tapering of QE but it is our belief that this will be mild and has, in fact, already been priced in. If there is no change in QE after this meeting, then it is a case of "watch out below" as far as the Greenback is concerned.

In accordance with this analysis, we are setting the Omicron FX Silver Trigger routine to take long trades in AUDUSD for now.

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