The US Dollar (USD) fell against most major currencies after Fed Chairman Ben Bernanke made comparatively dovish comments during Congressional testimony on Wednesday and Thursday. His speech pushed back expectations that the Fed might begin to trim QE in the near future, andchanges in QE policies continue to be unlikely through September. Bernanke pulled the chair, so to speak, diminishingthe Dollar’s main support framework, and disparaging the reason for recent Dollar rallies. Traders should expect to see further Dollar weakness in the coming weeks.
The Australian Dollar (AUD) bounced slightly higher before the week closed, as the People’s Bank of China announcedit will loosen control on lending interest rates. Nevertheless, the AUD/USD is still comparatively weak among major currencies,consolidating below 0.92 levels as investors hope for a Reserve Bank of Australia (RBA)interest rate cut in August. Last Tuesday the RBAreleased its meeting minutes for July and stated the inflation outlook could still result in further easing. Investors should remain cautious with the Consumer Price Index (CPI) which is scheduled for release on Wednesday; higher-than-expected inflation data ( previous figure was 2.5%year-on-year) may signal RBA stalling on rate cutsin order to keep inflation levels within the targeted range (2-3%). Technically speaking, even though the policy outlook has followed bearish trends, AUD/USD appears to be launching a recovery. A concrete breakthrough above 0.9280 may trigger short cover and push the pair higher towards 0.9400 or even 0.9520.
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