Early this morning we saw the FOMC finally pulling out the "T" word - Tapering.
"The Federal Reserve announced Wednesday that it would reduce its USD85 billion-a-month bond buying program by USD10 billion in January. In his last press conference as Fed Chairman Ben Bernanke said the economy was continuing to make progress." (Source : http://www.investing.com/news/forex-news/forex---dollar-back-off-5-year-highs-vs.-yen-after-fed-taper-move-256952)
This move was not totally unexpected, as the FED had more or less toyed with the market for the better part of the past 6-8 months. The move resulted in a sudden surge in the strength of the USD, but the effect was rather mixed throughout the various major pairs. In this article, my focus is on the AUD.
Technically
- The major trend is in a downwards continuation
- The Trend within Trend is in a downwards continuation
- Major support has been broken, but price still hovering in support region
Fundamentally
- Market has taken over with at least one known general consensus, first step in tapering has started, which could mean that further cuts could also be in the coming. Although it has not happened yet, market will be in bullish USD sentiment for awhile
- Hot money still on the table ? FED has done a great job by setting the stage where it has convinced the market that "Tapering" & "Interest Rates Increase" are 2 separate matters, and can be dealt with separately.
- Worldwide stock markets rallied, indicating market stance of "risk on" mode, but perhaps more cautious at this time until the unavoidable OPTIMISM creeps in, and it will
- Given the above, my view is that FED has smartly conserved its ammo for the next round of market manipulation
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