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USD Propped Up By Fed Taper Talk- AUD Downside Break Imminent

USD Propped Up By Fed Taper Talk- AUD Downside Break Imminent

2013-09-24 15:35:00
David Song, Strategist

Talking Points:

- USDOLLAR Preserves Upward Trend Following the FOMC Rate Decision

- Bullish Australian Dollar Momentum Breaking Down

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10562.33

10573.08

10543.45

0.18

56.69%

USDOLLAR Daily

Forex_USD_Propped_Up_By_Fed_Taper_Talk-_AUD_Downside_Break_Imminent_body_Picture_3.png, USD Propped Up By Fed Taper Talk- AUD Downside Break Imminent

Chart - Created Using FXCM Marketscope 2.0

  • USDOLLAR Propped Up by Ongoing Talks of Taper
  • Interim Resistance: 10,582 (23.6 expansion) to 10,589 (50.0 retracement)
  • Soft Support: 10,469 (June low)
  • Relative Strength Index Breakout Highlights Bullish Outlook

Release

GMT

Expected

Actual

S&P/Case-Shiller Composite-20 s.a. (MoM) (JUL)

13:00

0.80%

0.62%

S&P/Case-Shiller Composite-20 (YoY) (JUL)

13:00

12.40%

12.39%

S&P/Case-Shiller Home Price Index (JUL)

13:00

162.69

162.49

House Price Index (MoM) (JUL)

13:00

0.8%

1.0%

Richmond Fed Manufacturing Index (SEP)

14:00

12.0

0.0

Consumer Confidence (SEP)

14:00

79.9

79.7

Despite the slew of dismal developments coming out of the world’s largest economy, the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) pared the decline from the previous day amid the ongoing discussion at the Federal Reserve to scale back on quantitative easing.

Indeed, New York Fed President William Dudley, a permanent voting member on the FOMC, noted that a taper is still possible later this year and went onto say that the timeline laid out by Chairman Ben Bernanke ‘is still very much intact’ as the economic recovery gradually gathers pace.

As we still have a slew of Fed officials scheduled to speak in the coming days, the fresh batch of central bank rhetoric may play a greater role in driving USD price action, and we may see a more meaningful rebound in the greenback should we see a growing number of central bank officials show a greater willingness to taper the asset-purchase program at the October 29-30 meeting.

Forex_USD_Propped_Up_By_Fed_Taper_Talk-_AUD_Downside_Break_Imminent_body_ScreenShot140.jpg, USD Propped Up By Fed Taper Talk- AUD Downside Break Imminent

AUDUSD Daily

Forex_USD_Propped_Up_By_Fed_Taper_Talk-_AUD_Downside_Break_Imminent_body_Picture_1.png, USD Propped Up By Fed Taper Talk- AUD Downside Break Imminent
  • Bullish Trend at Risk as AUDUSD Carves Lower High
  • RSI Turns Around & Fails to Preserve Upward Trend
  • Interim Resistance: 0.9500 (38.2 retracement) to 0.9510 (1.618 expansion)
  • Former Resistance to Offer Support: 0.9270 (100.0 expansion) to 0.9290 Pivot

The greenback rallied against three of the four components, led by a 0.40 percent decline in the Australian dollar, and the AUDUSD may weaken further in the coming days as the bullish momentum falters.

The aussie-dollar looks ready to turn over amid the downside break in the Relative Strength Index, and it may only be a matter of time before price follows as the pair appears to have carved a lower top in September. Although the economic docket remains fairly light for the remainder of the week, the deviation in the policy outlook continues to foster a bearish outlook on a longer-term scale, and the AUDUSD may struggle to maintain the rebound from back in August (0.8846) as the Reserve Bank of Australia (RBA) keeps the door open to further embark on its easing cycle.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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