AUD/USD bulls taking control as US dollar slides

  • AUD on the bid as US dollar pulls back from CPI knee-jerk as Fed Powell pours cold water. 
  • AUD/USD bears in charge on the weekly chart. 

AUD/USD is trading back on the bid on Wednesday, climbing 0.45% at the time of writing, following Federal Reserve's chairman's dovish rhetoric. 

AUD/USD climbed from a low of 0.7430 to a high of 0.7485, supported as Jerome Powell said in remarks prepared for Congress that the economy was "still a ways off" from levels the central bank wanted to see before tapering its monetary support.

His remarks followed a stronger than expected Consumer Price Index print that saw the USD gain the prior day, while broadly weaker risk appetite posed a challenge for the Aussie. 

June CPI came in much higher than expected, with headline rising 5.4% YoY vs. 4.9% expected and 5.0% in May and core rising 4.5% YoY vs. 4.0% expected and 3.8% in May.  

The impact on US yields was compelling with the 10-year rising to 1.41% and 1.4230% today. This was the highest since July 6.

The data was the fourth month of upside inflation surprises. The transitory argument was getting harder and harder to sustain.

However, the benchmark has since levelled out to 1.3630 the low today following Powell's comments which have helped to temper the prospects of a faster pace of hikes from the Fed. 

''We think more and more on the FOMC are gravitating towards this stance. Tapering to us is taking the foot off the gas while hiking rates is tapping on the brakes, and there is a big difference between the two,'' analysts at Brown Brothers Harriman explained.

The analysts are expecting something ''more definitive at either the August Jackson Hole Symposium or the September 21-22 FOMC meeting if the US data continue to run hot.''

Overall, risks for the AUD/USD remain balanced between US yields, offshore equities and the Aussie jobs data for June coming up.

AUD/USD technical analysis

The focus is on the downside from a longer-term chart technical point of perspective as follows:

The weekly chart above illustrates that the price is been testing the environment below the early June lows and prior support structure. 

Bears still have a number of days before the week is out for a lower weekly close this week. 

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