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AUD/USD Forecast 20 Aug 2014

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AUD/USD Chart 20 Aug 2014
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AUD/USD Poised to Continue Lower Today

After a testimony by the Governor of the Reserve Bank of Australia (RBA) in front of a parliamentary panel in Brisbane, the currency market has started pricing in a weaker Australian dollar going forward. That said some key levels remain to be broken so there is no certainty as to when we will see a solid continuation of a move downward.

After the AUD/USD pair has opened around 0.9300 today, during the testimony of Mr. Glenn Steven it has been wildly gyrating up and down before picking a direction. That direction has been south as the weight of the strong Australian dollar which was emphasized by the RBA governor.

After visiting a daily high around the time Mr. Stevens said that further cuts in rates are not very likely at this juncture with inflation exercising pressures, marking 0.9320, we have seen the pair drop sharply after the Australian central bank governor said that the Australian dollar is overvalued by historical standards.

He proceeded to say that the market participants are not factoring in risks of a weaker Aussie going forward appropriately and the pair has shed the gains to mark a daily low around 0.9280. After the conclusion of Mr. Stevens' speech, the pair has been slowly consolidating awaiting further cues from the US session.

We are going to get the latest minutes from the FED's Monetary Policy meeting with expectations for no material changes, however if we get something dramatic, the USD could lose ground if the Federal Reserve announces some additional information about its exit from quantitative easing policy.

In any case, we will be buying daily put options at 0.9300, for tonight's expiry with current prices at 0.9295, that said if we see an hourly close above 0.9330 we would be reversing our bet with a daily call option to provide us with an opportunity to gain in this slow summer market.

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