- AUD/USD has risen on the FOMC Minutes.
- AUD/USD is currently trading at 0.6884 between a range of 0.6871 and 0.6896.
AUD/USD did not deliver the market impact hoped for, repeating what might have been expected following the Fed’s previous meeting and lacking the hawkish impetus for dollar bulls to run with the price of the DXy holding onto the 98 handle by the skin of its teeth.
Key notes from the minutes:
- Patient approach appropriate for some time even if global conditions improved.
- Many Fed officials saw inflation to as likely transitory.
- Fed discussed pros and cons of shortening bond portfolio maturity
- Generally agreed a patient approach to interest-rate policy changes was warranted.
- A few Fed policymakers said that monetary policy might need to be tightened if economy evolves as expected.
- Many Fed policymakers said holding shorter duration maturities could help future maturity extension programs.
- A number of Fed policymakers said a portfolio of more capacity for a maturity extension program was more desirable than a proportional portfolio with maturities similar to those of outstanding treasuries.
- Many Fed policymakers said recent dip in PCE inflation likely to be transitory.
- Discussed options for reaching the long-term portfolio composition, considered accelerated versus gradual approaches.
- Several of Fed worried by risk of low inflation expectations.
- Some say low inflation could on anchor expectations.
- Inflation pressures remain muted.
- Few note there still may be slack in the economy.
- Some say downside risks to growth decreased.
- Most say downside risks to growth remain.
The focus will now switch back to the U.S. calendar with Markit Manufacturing and Services PMIs, New Homes Sales data and Durable Goods all in play. Elsewhere, the downbeat expectations for the Aussie economy should continue to weigh on the currency ahead of the RBA in June and any further escalation of trade wars will also hinder the prospects of bulls digging their way out of a hole below the 0.69 handle.
Analysts at Commerzbank noted that AUD/USD nearly reached the 78.6% Fibonacci retracement at 0.6857 and reversed just ahead of here:
“Immediate downside pressure is maintained while capped by the 6 week downtrend at .6928, and a close below the .6857 Fibo will target the .6738 December 2019 low. However we note the 13 counts on the 240 minute chart and we suspect that the market will attempt to recover from here. Above the downtrend would allow for recovery to the 55 day ma at .7058.Further up resistance can be spotted at the .7207 February high. Where are we wrong? A rise above the .7207 late February high would target the 55 week moving average at .7220 and the December 2018 high at .7394.”