
The
Australian dollar remains just above the resistance turned support level we identified prior to the release of the Reserve Bank of Australia (RBA) minutes for August. In the event, the same minutes were totally neutral for the currency, saying only
that while the monetary authorities are keeping the door open for further
reductions in the cash rate, which tends to reduce the strength of the Aussie,
they are not going to do so in the near future.
Therefore
our recent analysis stands.
As with the
Aussie, the fate of the Euro or, to be more specific, the Euro / US Dollar pair
(EURUSD), is now almost wholly dependent on what happens at the meeting of the
US Federal Open Market Committee (FOMC) later in the week. The expectation is
that the much anticipated tapering of Quantitative Easing will begin and no
doubt there will be volatility in the FX and other markets initially, no matter
what is announced. As the Fed is more concerned with damping this volatility we
suspect that the tapering will (1) be mild and (2) be such that it can be
judged to already have been priced into rates.
Thanks for this very informative.
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