September Australian Dollar Inching Up Ahead of Bernanke Talk

The September Australian Dollar is posting a solid gain this morning after taking out its most recent top at 1.0217. The strong move has put the Aussie in a position to challenge the July 5 top at 1.0261. A move through this level will make the April 27 top the next potential upside target.


Early last week the Australian Dollar penetrated an uptrending Gann angle currently at 1.0139. Since the main trend was down on the daily chart, this move should have attracted additional selling pressure, but shorts began covering after rumors spread of possible additional stimulus from a collection of central banks. These rumors have persisted for several days without any substantiation.

Today and tomorrow, U.S. Federal Reserve Chairman Ben Bernanke speaks before Congress and he could put an end to speculation that the Fed is ready to implement another round of quantitative easing. Since U.S. Retail Sales unexpectedly fell last month as reported yesterday, the U.S. Dollar declined against the Australian Dollar as traders bet that the Fed would act on this news.

Bernanke isn’t expected to come right out and say the Fed is ready to move, but traders will be looking for hints in his speech. He may not even talk about QE at all which will be a disappointment for traders. This could trigger a turnaround in the dollar and put pressure on the Aussie. Some feel that Bernanke will focus on the deficit and make suggestions regarding increasing taxes and avoiding severe austerity measures.

Besides the Fed, traders are also pricing in the possibility that the European Central Bank and China’s central bank stand ready to boost their economies with new stimulus. Volatile moves could be triggered if Bernanke doesn’t mention anything about quantitative easing but investors decide to place more emphasis on Europe and China coming through with their stimulus packages.