Ben Bernanke pretty much delivered what the market had been anticipating when he signalled a reduction in the Fed’s quantitative easing programs. The initial market reaction was to sell stocks, sell gold, buy the USD and sell risk-related currencies. The market will now focus on emerging markets in Asia and see how badly affected their equity and debt markets are by the announcement.
Elsewhere the HSBC version of Chinese manufacturing PMI should also have an impact on market volatility and the AUD in particular.
The AUD/USD fell by almost 300 pips from its intraday highs at .9550, a ridiculous over-reaction in my biased view. This market is already heavily short and I’m expecting much of these losses to be reversed in coming sessions. The longer-term charts look oversold to me and once the market realises that there is still no reason to be bullish USD, the AUD/USD should start recovering.
USD/JPY also bounced significantly but this is a very false move in my view. Risk off is the primary sentiment and that will mean a lower USD/JPY once positional unwinding picks up pace and I’m looking at solid technical resistance 97.60/98.00 as the ideal sell-zone.
AUD/JPY has closed below the important 90.00 level and next strong technical support is at 88.60.
AUD/NZD has broken lower but strong bids are being reported 1.1700/25.
EUR/USD has again been pretty stable with all of the action on the crosses. EUR/AUD is worth watching as it nears important resistance at 1.4350.
EUR/GBP is having another go at breaking above .8600 and we can expect plenty of stops through that level. The CHF has again been very steady.
Good luck today.