AUD/USD: 0.7190EUR/USD: 1.0925The dollar has recovered on Tuesday following the solid US inflation and manufacturing data, which did nothing to suggest that the Fed are likely to refrain from raising rates later today. A recovery in the price of oil and also in stocks saw a more positive attitude towards risk sentiment and suggests that the market is now full prepared for a 25bp rate hike, with all the interest likely to be in the tone of the statement and then in Janet Yellen’s outlook, in her press conference. Expect it to be a wild ride late in the US session. Best advice is to be square into the decision and then to go with the flow. Good luck
After reaching up to 0.7282 on Tuesday, AUDUSD has now reversed sharply lower, to 0.7160, under pressure from the stronger US$, where it has set up what looks to be a beautiful head/shoulder formation. If correct, the target would be around 0.6930.
Today sees the WBC Leading Index and the CB Leading Indicator, as well as a speech by the RBA’s Debelle, although expect a fairly rangebound session while awaiting the FOMC meeting.
Expect a volatile reaction, later in the day,to the Fed announcement, where US$ strength would see the Aud break below the current support at 0.7150/60 (0.7155; 61.8% of 0.7015/0.7385) and which would then open the way for a steeper fall to 0.7100 (76.4%) and to 0.7070 (18 Nov low). Below that would see a run at 0.7000 and eventually to 0.6930, albeit that this may be for another day.
A rally back above 0.7200 would encounter strong resistance at the session high, if seen, but above which would then want to take a look at 0.7292 (76.4% of 0.7333/0.7160) and then, above 0.7300, back to last week’s spike high of 0.7333, seen after the jobs data.
Jim LanglandsFX Charts
