Saturday October 2, 2010 - 02:42:22 GMT
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Aussie Dollar Traders Waiting for Bullish News from RBA
The AUD USD closed higher for the week, but the pace of the
rally was slowed by the rangebound trade in the U.S. equity markets. Some traders
also feel the Aussie Dollar is overbought in the short-run while others believe
that the expected 25 basis point hike in the benchmark interest rate by the
Reserve Bank of Australia
is already priced in. The RBA meets on October 5.
In addition to the rate hike, traders want to hear that
additional hikes will follow shortly in order for the Aussie to breakout above
resistance at .9850. Look for selling pressure to begin if the RBA fails to
raise rates or hint at future hikes.
Fundamentally, the Australian Dollar is expected to remain
underpinned by bullish economic news from China. Although Australia boasts of a strong banking system, a
robust mining business and a central bank that has been aggressively raising
rates, it is still very reliant on China for economic growth.
Technically, the Aussie Dollar remains entrenched in an
uptrend. Upside momentum has been slowing, but no solid sign of a top has
developed. At this point on the chart and because of short-term overbought
indicators, this market needs a catalyst to propel it through the last main top
at .9849. Hopefully the bulls will get the news they are waiting for in the
central bank statement.
The EUR USD finished the week and month sharply higher. The
driving force behind the spectacular rally was the fact the U.S. Federal
Reserve green lit the move earlier in the month at its last Federal Open Market
Committee meeting by hinting at another round of additional quantitative
The Euro finished the week by soaring all session Friday, hitting
a new-six month high, as a report indicating brewing developing weakness in the
U.S. manufacturing sector supported speculators betting on additional
quantitative easing by the Federal Reserve.
Traders have been driving the Euro higher on the thought
that the Fed will have to resume large-scale purchases of Treasury Bonds in an
effort to provide liquidity to the economy to keep the recovery from
The Dollar has been under relentless pressure since the
Federal Open Market Committee meeting several weeks ago. At this meeting the
Fed hinted strongly about resuming its asset-buyback program, also known as
quantitative easing. As long as QE remains on the table no one wants to hold
This morning, the Institute for Supply Managementâ€™s Index of
U.S. manufacturing activity fell to 54.4 in September from 56.3 in August. The
number was not low enough to warrant fear of a double-dip recession, but not
strong enough for the Fed to remove the threat of Fed QE.
The Greenback remained under pressure most of the day even
though the Reuters/University of Michiganâ€™s
Final Consumer Sentiment report was revised upward to 68.2 from 66.6 and U.S.
Consumer Spending rose to 0.4% in August, while incomes rose 0.5%.
Euro traders also shrugged off a report confirming a
slowdown in the pace of manufacturing growth and an elevated regional
unemployment rate of 10.1% in August.
This meant that traders are more concerned about the
prospects of fresh QE by the Fed than a slowdown in the Euro Zone economy.
Technically, the Euro remains on pace to reach a major
Fibonacci Retracement Level at 1.3896. There may be a technical bounce because
of profit-taking at this level, but the trend should remain strong unless the
50% level at 1.3510 is violated.
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