FOMC Minutes: Shrinking of balance sheet to start later this year, waiting FOMC tomorrow
The March FOMC minutes was overall hawkish. They outlined the steps to shrink the USD 4.5T balance sheet. The minutes noted that the reduction has to be “gradual and predictable”, accomplished by “phasing out” or reinvestment and such process could start “later this year”. No detail is provided yet but the minutes said Fed will “its deliberations on reinvestment policy during upcoming meetings and would release additional information as it becomes available.” Meanwhile, some officials are concerned that if unemployment falls further, it could pose “significant upside risk” of inflation. The minutes also showed “some participants viewed equity prices as quite high relative to standard valuation measures.”
AUD/USD Daily Outlook
AUD/USD's fall from 0.7748 continues today and reaches as low as 0.7532 so far. Intraday bias remains on the downside for 0.7490 support. A decisive break of 0.7490 will confirm completion of rise from 0.7158. In such case, near-term outlook will be turned bearish for 0.7158 support. On the upside, above 0.7586 minor resistance will turn bias neutral first. And, break of 0.7678 minor resistance will turn bias back to the upside and could extend the rise fro 0.7158 through 0.7748 resistance.
In the bigger picture, we're still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, a stronger rise should be seen to 55 month EMA (now at 0.8165) and above.
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