The Australian dollar was mostly flat ahead of the Fed meeting result later today. As the market remained on a cautious tone, a basket of currencies fluctuated with the greenback going up and down after the opening bell on Wednesday morning. The previous gains of the Aussie failed to support the bullish track of the currency. Alongside, crude oil prices were mostly on the negative ground as well due to the unending OPEC output concerns. Where will these market volatilities take the commodity currencies?
At the time of writing, the two-day Fed meeting was being held. The forex market was headed by the temporary strength of the sterling and the Euro against the US currency while the Australian dollar remained to be in the challenging momentum.
The Australian dollar went from flat to 0.04 percent lost against the greenback as the investors turned anxious over the expected rate increase from the US central bank. The AUD/USD opened at 0.74931 with a session high of 0.75057 and a session low of 0.74921.
As of 10:36 UTC, the pair settled at 0.74977, near to the Tuesday’s close at 0.75006. The pair touched its 20-day SMA of 0.74939 and went close to its 50-day SMA of 0.74885.
Currently, the trading range of the pair was still tight at 0.74900 levels. In a wider look, AUD/USD was far from the weakest point at 0.73200 which was reached in the mid of November. However, the pair was away from its peak at 0.77690 attained last month as well.
For the last quarter of the year, the Australian dollar was likely to remain flat against the greenback. The expected roll back of the crude oil prices in 2017 may provide a support for the commodity currencies. Thus, the Aussie could have a potential hike in the coming year.
Meanwhile, oil prices edged lower in the session earlier as the upbeat US crude stocks added to the negative notion over the OPEC output cut.
Most of the investors failed to trust the effect of the curbing of production of the majority of the oil producers. Since the agreed plan of the cartel will materialize in 2017, the remaining months of 2016 could result into a higher-than-expected oil output. The flooded oil market kept on dragging the prices lower, although in a brighter side, oil prices hit $52 to $55 per barrel.
On the New York Mercantile Exchange, WTI crude oil lost 1.19 percent to $52.35 per barrel for January contracts while RBOB Gasoline declined 1.75 percent to $152.36 per gallon. Brent crude oil for February delivery on the International Commodity Exchange dropped 1.04 percent to end at $55.14 per barrel.
The strong trade link of Australia with China makes it dependent on the commodity prices. Although in some instances, the Australian currency can get support from the Reserve Bank of Australia in times of a rate increase.
Currently, a rate increase is out of the RBA’s table since a sustainable growth of the economy was still out of reach. The Australian central bank noted the slow pace with economic recovery, however, the growth was still not enough to push a rate adjustment. In light of these market volatilities associated with the Aussie, a bullish outlook won’t happen anytime soon.
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