AUD/USD begins the Fed’s day with little change

  • AUD/USD remains sidelined around 0.6865.
  • The recent recovery in market sentiment couldn’t ignore dovish RBA minutes.
  • Investors’ wait and wait mode ahead of the Fed decision also limit the pair’s moves.

Despite a recovery in market sentiment, AUD/USD offers fewer moves while taking rounds to 0.6865 during initial hours of Asian morning on Wednesday.

Dovish monetary policy meeting minutes from the Reserve Bank of Australia (RBA) ignored upbeat news that the US and Japan have signed initial trade agreement while the US and Chinese negotiators are all loaded to sit back on the trade talk table.

It could be said that better forecast Industrial Production and Capacity Utilization from the US, coupled with the New York Fed’s repo injection of around $53 billion by the end of Monday, with another round expected to propel $75 billion by the Tuesday-end, might also have contributed to the US Dollar (USD) strength and curbed the Aussie gains.

Further, Saudi Arabian Oil Minister’s comments that the nation’s oil supply is fully back online and will restore 70% of the output within few weeks rather than previously expected months of recovery offered additional peace to the traders.

While recent risk recovery helped Wall Street to close in positive, the US Treasury yields couldn’t post gains as traders remain cautious ahead of the key event.

Moving on, Australia’s August month Westpac Leading Index, prior 0.14% MoM, seems to offer initial trigger to the price momentum while trade/political headlines likely providing intermediate moves ahead of the key Fed decision where the US central bank is majorly anticipated to announce a 0.25% Fed rate cut. Investors will be more focus on the language of the Fed’s Monetary Policy Statement and press conference from Chairman Jerome Powell.

TD Securities hold its bearish bias intact for the Federal Open Market Committee (FOMC) communication as it says, “In regards to communication, the FOMC will likely continue to characterize the additional accommodation as a "mid-cycle adjustment" or "insurance cuts" and not the beginning of an easing cycle. However, they will not close the door to additional cuts. In fact, we look for another 25bp cut in October and further 75bp of easing in 2020. The dot plot should reflect a number of FOMC voters projecting 75bp of total easing for this year, but not enough to move the median lower to that level. Presidents George and Rosengren should dissent again at the meeting.”

Technical Analysis

Unless providing a decisive break below 21-day exponential moving average (EMA) level of 0.6830, the pair is less likely to revisit sub-0.6800 area while an upside break of 0.6910 becomes necessary to lure buyers targeting 0.6960 and 0.7000 round-figure.

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