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Forex Flash: AUD/USD, risks to break 1.02-06 range skewed to the downside - Societe Generale

FXstreet.com (Barcelona) - According to Societe Generale Kit Juckes, "over-stretched valuations have been a barrier to further gains for higher-yielding currencies, but as soon as the US rate cycle turns the dollar will embark on a long-term re-pricing... "

On the AUD/USD, it continues trapped in a 1.02-1.06 range for 10 months now, "due to those 3.1% yields, but can't get higher and when/if that spread gets eroded significantly further, it will fall."

Kit adds: "At some point better US data will make the Fed talk more about ‘tapering off' bond buying and the markets will think about what policy normalisation might look like. Our end-year 10yr Treasury yield forecast (2.75%) may look miles and miles away at the moment, but it is clear that it would dramatically undermine the value of (for example) Australian government bond yields. If ‘carry' is the driver of investor behavior above anything else, even a 1% rise in US yields changes quite a lot."

Session Recap: The USD falls on non-event FOMC

The FOMC confirmed that in this occasion its monetary policy meeting was a non-event. The Committee voted to maintain the Fed's assets purchases at $85 billion per month and signaled it is prepared to either "increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes".
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Forex: EUR/USD closes its fourth day of gains but remains below 1.3200

After testing the highest level since February 25 at 1.3241 in the early American session, the EUR/USD traded lower on the rest of the session with the pair pricing back below the 1.3200 area at 1.3180. Wednesday was the fourth positive day in row but as FXstreet.com's analyst Valeria Bednarik commented in a recent report, "despite the strong upward momentum seen in European currencies this Wednesday, the upward continuation is not a done deal."
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