FX News – August 6: USD Weakens, AUD Gets Boost

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The greenback suffered in today's trading after Atlanta Fed Bank President Dennis Lockhart said that the initial cut in its bond-buying program could happen at any of the three remaining policy meetings for the year: September, October and December.

Mr Lockhart's announcement helped the EUR/USD pair break past the 1.3300 level today. It peaked at 1.3323 in today's trading before sliding back a little to its current level at 1.3305.

Initial resistance for the EUR/USD is at 1.3280, followed by 1.3313. Meanwhile, initial support is at 1.3211, followed by 1.3178.

The GBP/USD also received a slight boost from Mr Lockhart's statement, as the pair peaked at 1.5386 so far in today's trading. As with the EUR/USD, the cable slipped a little after the statement and is currently trading at 1.5366.

Analysts see the upcoming BoE as a factor that might have prevented a dramatic rise of the GBP/USD. They expect that the BoE will introduce forward guidance that could drag down the GBP.

Initial resistance for the GBP/USD is at 1.5429, followed by 1.5468. Meanwhile, initial support is at 1.5307, followed by 1.5269.

Earlier today, the Reserve Bank of Australia announced a 25bps cut in cash rates bringing it down to a new record-low of 2.5%. This helped lift the AUD/USD from of 0.8915 prior to the announcement to a peak of 0.9004. The pair has slid back to the 0.8975 levels as of the moment.

However, the continued pressure on Australia's mining sector due to the weak Chinese economy still threatens to weaken the aussie again in the future. Even RBA Governor Glenn Stevens mentioned that the aussie remains overvalued despite the 15% drop in its value over the recent months. According to Governor Stevens, "it is possible that the exchange rate will depreciate further overtime, which would help foster a rebalancing of growth in the economy."

By FX Strategy Team, Published on 6th of August 2013
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