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Aussie / U.S. Dollar Ahead of the Fed

By: Emerging Money
Posted: 4/30/2014 11:22:00 AM
Referenced Stocks:

The U.S. dollar is in a holding pattern ahead of the Fed.  In fact you can see the Fed effect in Aussie dollar/U.S. dollar pair (AUD/USD) for the past 5 sessions.

Image courtesy Martin Kingsley: http://www.flickr.com/people/43426549@N00 Sentiment remains fragile as market participants look to the Federal Reserve's monthly policy statement (Scheduled Release 2pm EDT), a statement that will be dissected word by word.

With any huge headline release such as the Fed statement, we are likely to see the pair jump on the release as trading computers search for keywords in the statement.  As always, I warn you not to get caught in the volatile move at the time of the headline but rather take the time to read the statement.

Analysts are expecting the Fed to maintain its current plan for tapering its bond asset buying program.  Inline results should be just that - in line, no thrills. However, keep an eye on the offset chance of a change to the current timetable or the amount of tapering as this will indeed push the needle.

The U.S. dollar continued holding support even after yesterday's U.S. Consumer Confidence report indicated a drop in confidence from 83.0 in March to April's 82.3.  I remain bullish on the U.S. dollar ( UUP , quote ) and barring a surprise from the Fed, would expect the AUD/USD to continue it's slow but steady trek lower.

The Currency Shares Australian Dollar Trust ( FXA , quote ) has been fairly good proxy as a vehicle in the equity markets.