The australian dollar rose to a 7-week high of 0.7340 on extended gains in Europe from 0.7280 (+60 pips) as the dollar fell across the board following the dovish FOMC minutes yesterday. The aussie was trading yesterday in New York at 0.7180 and made steady gains in Asia to Europe opening at rate of 0.7275 (+95 pips). The market is thin and choppy at times, with the Japanese participants away for their 3-day weekend holiday.
The aussie was well bid and rose 3.5% for the week based on the strong commodities rally and global stock market gains following the FOMC Sept 17 minutes yesterday. Copper futures +2.1% and Dalian iron ore futures +3.3%, after Glencore rebounds +4%. Nikkei closed +1.64% while Topix +2.26% and Shanghai +1.32%.
Risk appetite returns after the FOMC minutes revealed the reluctance and a cautious stance of the Fed policy makers to raise interest rates. The FOMC members felt conditions for hiking has already been factored in the market. Several members warned a premature rate hike could hurt the Fed's credibility if inflation remains low.
The aussie is trading above the 0.7300 level as it continues to benefit from the return of risk appetite and the strength of rising commodities primarily led by the metals market. Australia is the world's largest exporter of iron ore and the second largest on gold and uranium.
With the week drawing to a close, expect a consolidation path between 0.7350 - 0.7300 with a 20% correction decline to 0.7300-0.7280. AUDJPY also gave support as the rate climbed to 88.30 from 86.75 on yen selling. The 14 day moving average rose from 0.7250 to 0.7325. Support seen at 0.7250-60 level based on the 14 DMA.
Chart: WorldWideMarkets Alpha Trader