AUD/USD traded close to two-week lows ahead of Fed minutes

Australian dollar fell for a third day against the greenback, trading close to two-week lows, as markets awaited the release of the minutes of Feds most recent meeting on policy.

AUD/USD fell to its lowest point today at 0.9017 at 2:00 GMT, also the pairs lowest since August 8th, after which consolidation followed at 0.9030. Support was likely to be found at August 7th low, 0.8920, while resistance was to be met at August 19th high, 0.9233.

The Aussie continued to lose ground against the US dollar today, which made it the worst performing currency among the Group of 10 currencies this year, following the Reserve Bank of Australias (RBA) signal on Tuesday, that further interest rate cuts were possible. RBA Governor Glenn Stevens and his board reduced the benchmark interest rate by 2.25% since late 2011, as economic growth decelerated and unemployment rate increased. The Reserve Bank of Australia said, in the minutes of its most recent policy meeting: “Regarding the communication of this decision, members agreed that the bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further. The course of the exchange rate would be important.”, as reported by Bloomberg.

Additionally, traders saw a 60% chance that Australian central bank will reduce its benchmark interest rate again by the end of this year, according to interest-rate swaps data announced by Bloomberg.

Earlier today it also became clear that the Westpac – Melbourne Institute Leading Index, which is used to forecast economic growth in Australia in short and intermediate term, remained flat in June, after it dipped 0.1% a month ago, which was a revision down from a 0.2% gain previously.

Meanwhile, the US dollar was put under selling pressure yesterday amid massive speculation that the Federal Reserve Bank may begin to taper its asset purchases as soon as September this year. Market players awaited the release of the minutes of Fed’s July meeting, scheduled on Wednesday, as it may provide clues on whether such action was inbound.

“If we do see a reiteration that the Fed will start tapering as early as September, I think 90 U.S. cents will be breached on the downside, bringing 88 1/2 into play,” said Michael Judge, a dealer in Sydney at OZForex Pty Ltd., an online currency company, referring to the Australian dollar, cited by Bloomberg. “Broader-term weakness in the Aussie is still very much intact.”

Elsewhere, the Aussie was higher against the kiwi dollar, as AUD/NZD cross advanced 0.34% to trade at 1.1413 at 7:51 GMT. On the other hand, Australian dollar was losing ground against the euro, with EUR/AUD pair gaining 0.51% to trade at 1.4870 at 7:52 GMT.