AUD/USD edges higher around 0.7550 on Jerome Powell-led optimism

  • AUD/USD bulls take a breather following two-day uptrend.
  • Fedspeak returns to normal, fades last week’s hawkish rhetoric.
  • Sino-American trade deal updates, US stimulus and Delta Plus woes got lesser attention.
  • Activity numbers to decorate calendar, risk catalysts become the key for fresh impulse.

AUD/USD begins Wednesday’s Asian session with a pullback to 0.7543, around 0.7551 by the press time, after rising for two consecutive days. While the latest moves could be termed as consolidation the earlier run-up takes clues from the US Federal Reserve (Fed) official’s comments, mainly by Chairman Jerome Powell.

Fed tones down rate-hike, tapering jitters…

Not only Fed Chair Powell but others from the US central bank team also conveyed a hesitant acceptance to the inflation fears that don’t back consensus, amid employment challenges, favoring monetary policy adjustments.

Powell’s comments suggesting the way out of the transitory inflation fears in a year and shortfalls in unemployment cooled down the market bulls. Earlier in the day, Cleveland Fed President Loretta Mester and New York Fed President John Williams already cited employment as the hurdle to think before signaling any action. On the contrary, San Francisco Fed President Mary Daly hints at tapering to begin this year or the next.

On the same line, notable progress in the negotiations concerning US President Joe Biden’s infrastructure spending plan also favored the market sentiment and underpinned Antipodens versus the greenback.

It’s worth noting that comments from China’s Global Times (GT) suggesting the “make or break” situation of the Sino-American trade talks preceded the fears of further trade tension due to Beijing’s inability to import agreed US goods again in May. Also on the negative side could be the fears of another variant of the coronavirus (COVID-19), known as Delta Plus.

Additionally, China’s watch on iron ore, Australia’s key export item, dragged down Dalian Iron Ore futures and probed the AUD/USD bulls.

Against this backdrop, Wall Street benchmarks posted mild gains whereas the US 10-year Treasury yields dropped 1.8 basis points (bps) to 1.467% by the end of Tuesday’s North American trading session.

Moving on, a lack of major data/events may test AUD/USD recovery from the yearly lows ahead of the initial activity numbers from the US. Also important are the headlines concerning US stimulus, covid and US-China trade relations.

Technical analysis

AUD/USD buyers battle 200-day SMA, around 0.7555-60, amid bearish MACD. The yearly horizontal area surrounding 0.7580 adds to the pair’s upside filters. Meanwhile, the 0.7500 threshold, the recent low near 0.7475 and the August 2020 high near 0.7415 could lure sellers during the downward trajectory.

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