Why am I not surprised that AUD/USD is trading at 1.0200? I wrote in earlier market reviews that the strong Aussie (as a result of Fed QE3) will only harm the Australian economy as expensive exports and a continued slowdown in China will ultimately lead to rate cuts and perhaps unconventional measures to ensure that Australia remains competitive in the markets. We are likely to witness central banks across the world battling in the virtual world of finance. The Bank of Japan (BOJ) and Swiss National Bank (SNB) may be next to act so careful analysis should be applied to JPY and CHF pairs and crosses.
PBOC Easing
For those that are currently shorting the Aussie please note that the People's Bank of China (PBOC) cut rates several months ago at the same time that the Bank of England (BOE) announced its monetary policy. An interest rate cut from China tends to strengthen AUD against a basket of currencies and the bullish spike could easily exceed 60 pips in less than one minute. The BOE is due to announce its monetary policy for October 4, (Thursday) at 11:00am GMT.
Spain Financial Bailout
Spain's refusal to ask for imminent financial aid from the EU is not appealing to the markets' bulls. EUR/USD has shed some of its gains as we enter the European session. Main focus for today is clearly on the ADP non-farm employment change and the ISM non-manufacturing PMI. The US ISM Manufacturing PMI released Monday surprised the markets as the data confirmed the US is out of the contraction zone for the manufacturing sector. More surprises to the upside in today's session and we may see a strong rally in the leading American indices.
SP500 Technical Analysis
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