US Dollar Moves Currency Market Ahead of Fedís Decision
The US dollar index drew support line at 80.94 and bounced up to 81.32 as investors focus on FOMC meeting, expecting some asset tapering of the $85B bond buying program. In addition to that traders were collecting profits by covering short positions. We will be busy today with economic announcements but we would be cautious in our trading ahead of the Fedís monetary policy announcement tomorrow. Therefore we expect the greenback to remain in sideways until tomorrow evening between 81.32/80.94 recently created range.
The Reserve Bank of Australia released earlier on Tuesday its September 3 meeting minutes stating that the possibility of reducing rates further is not eliminated but also a reduction is not imminent. Moreover the Central Bank considers that the exchange rate is still high and should move lower accompanying current low key rate could provide a greater degree of stimulus to the economy. The Australian dollar found resistance at 0.9385 against the greenback and dropped to 0.9284 after the RBA release of minutes but recent US dollar weakness drove the pair slightly up, it was lastly seen at 0.9319.
The USDJPY found support yesterday at 98.63 and earlier today was capped by 99.35, retreating to 99.00. The USDCAD moved in a similar way, upside barrier at 1.0332 weighed on the pair that is currently fluctuating at 1.0323. For a second consecutive day we see mainly that the US dollar is making the moves in the currency market, thus crosses continue their consolidation. We consider that the US dollar in the longer term will be underpinned as the Fed would start asset tapering.
Looking ahead, investors are monitoring on Tuesday UK CPI figures, Euro Zone ZEW Economic Confidence indicator and US inflation reading. However response to todaysí release would be mild as traders and other market participants are highly anticipating tomorrow FOMC Statement and Projections.