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Forex: AUD/USD opens around parity, new exciting trading era

FXstreet.com (Barcelona) - The AUD/USD is trading around the parity level in the early going of Asia, still convalescent following days of strong liquidation on the Aussie rate. The fall led to a break of a year-long range through 1.0150/10 last Thursday, confirmed on Friday by printing its lowest since June 14 before profit taking kicked in ahead of last Friday's NY close.

From a fundamental standpoint, the sell-off in the exchange rate has come, ironically, at a time when odds for further RBA cuts had been largely reduced following an astonishingly upbeat jobs report in Australia last week.

What has triggered then the recent surge in the US Dollar, allowing the pair to break out of its torturous range? The talk is that the Fed might be mapping an exit strategy to its stimulus program, according to Fed observer and WSJ reporter Jon Hilsenrath. He published an article - "Fed Maps Exit from Stimulus" - last Friday, saying:

"Federal Reserve officials have mapped out a strategy for winding down an unprecedented $85 billion-a-month bond-buying program meant to spur the economy—an effort to preserve flexibility and manage highly unpredictable market expectations.
Don't expect an imminent announcement."

However, one of the aspects that matter the most, that is, the timing on when they will start to taper off the amount of bonds purchased, is still unknown. As Mr. Hilsenrath notes: "The timing on when to start is still being debated."

In view of Greg McKenna, founder at Global FX: "We continue to favour a move toward the 200 week MA at 0.9857, which is also the trendline in the chart above, as a first target and then we'll see after that. Some people are thinking the Aussie is oversold and perhaps on the dailies and hourlies it could be but the Weeklies have only just begun."

Greg reminds his audience that "we are seeing sellers emerge on rallies not buyers on dips for the first time in quite a while."

If that pattern of selling on rallies were to continue, new fresh supply at 1.0175/1.02 on 30m chart is noted, as per drop/base/drop on May 9. Ahead of this level, there is supply in the 5m chart at 1.0124-40, produced also on May 9. On the downside, sellers should now penetrate demand through 0.9965/0.9920, as per June 13/14 box.

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