01.09.202012:01 Forex Analysis & Reviews: EUR/USD and AUD/USD: Dollar demand continues to decrease amid revisions on Fed monetary policy. Meanwhile, RBA leaves rates unchanged, but expanded its lending program.

Dollar continues to decrease in price in the market, largely due to the revisions made by the Fed on monetary policy.

Fed vice chairman Richard Clarida delved deeper on this issue yesterday, explaining more clearly the committee's overall approach to the future of monetary policy.

First of all, Clarida dispelled the hopes of investors who expected the Fed to introduce control over the bond yield curve, which, by the way, began to decline rapidly again, making Treasuries less attractive, and decreases demand for the US dollar. He said that the potential gains from controlling the yield curve may be marginal, and controlling itself is a very complex tool. Only in the case of very serious situations will the Fed consider the possibility of introducing control over the curve.

After that he talked about negative interest rates, and said that such are currently inappropriate, therefore, leading indications and large asset purchases will continue to be more effective incentive tools. Raising rates are also not applicable at the moment, mainly because a low unemployment has never led to a surge in inflation, even in the past.

Although many Fed officials were actually skeptical on the new policy for average inflation, flexibility on this issue is important, because no matter how hard the Fed may oppose it, it is clearly wrong to resort to other more serious tools. Nonetheless, Clarida said that the committee will resume discussions soon, but clear prospects on this matter are beyond reach yet.

Meanwhile, with regards to the coronavirus pandemic, Atlanta Fed president Raphael Bostic said that economic recovery will slow down, and it will take much longer than expected to return to pre-crisis levels. According to him, declaring victory over the pandemic should not be done prematurely, and the main task of the Federal Reserve is to stabilize the economy amid any crisis.

Such a speech made investors doubt that a rally will occur in the US dollar, and the renewed decline in yields and increasing demand for gold have backed this idea up even further.

Thus, in the technical picture of the EUR / USD pair, the bulls are clearly aiming for a breakout from the 20th figure, and if they succeed in achieving this, price will reach a level of 1.2020, or even the highs of 1.2080 and 1.2140 ... However, if the bears manage to pull the price down to 1.1935, the pair will decline towards 1.1885 and may even test the level of 1.1810.

AUD / USD

The RBA has left interest rates unchanged as expected, therefore, the AUD / USD pair did not move significantly in the market.

Most likely, the bulls will have to consolidate the quote above 0.7390 in order to raise the AUD / USD rate, as such will be the only way to push the quote towards the highs at 0.7460 and 0.7520.

However, if the bears manage to hold the quote at 0.7390, price will surely return to 0.7345 again.

Aside from the unchanged rate, the RBA announced an increase in the volume of lending in its program, raising it to 200 billion Australian dollars. It will also buy 3-year government bonds in the required volumes to maintain high liquidity in the financial system, and in terms of future developments, will continue to explore further actions that would support economic recovery.