- AUD/USD fades the Fed-led bounce off weekly low.
- US dollar eased on Fed Chair Powell’s resistance to provide hints of tapering, covid woes in Australia challenge bulls.
- Traders also shrugged off Aussie CPI as RBA already watered-down policy changes.
- Australia Import-Export Price Index for Q2, US Q2 GDP will be the key data, risk catalysts are important too.
AUD/USD edges higher around 0.7370 as the FOMC-led boost to the north stalls during early Thursday morning in Asia.
The Aussie pair earlier benefited from the US dollar broad weakness on the Fed’s refrain from discussing taper but the coronavirus Delta variant fears at home and abroad tame the upside momentum of late. Also challenging the bulls could be sluggish equities and cautious sentiment as US policymakers hold procedural votes on President Joe Biden’s infrastructure spending plan.
The US Federal Open Market Committee (FOMC) matched wide marked expectations of announcing no monetary policy change, despite mentioning, “continuing economic improvement,” during the July meeting. The US central bank Chairman Jerome Powell played smart and pushed back the force to utter tapering details despite saying, "Economy has made progress toward goals since setting the bar for taper in December and will continue to assess progress in coming meetings."
The US Dollar Index (DXY) dropped to a 12-day low following the Fed outcome, printing a three-day fall, which in turn favored Antipodeans but couldn’t help Wall Street. Further, the US 10-year Treasury yields seesaws around 1.23% and marked no major reaction to the news.
It’s worth noting that the AUD/USD prices paid a little heed to Australia Q2 Consumer Price Index (CPI) data earlier on Wednesday as they matched firmer forecasts. The reason could be linked to the covid concerns emanating mainly from New South Wales that marked a fresh high, unfortunately, of infections since March 2020, pushing PM Scott Morrison to announce an additional local relief package.
Moving on, updates from the US Senate could offer immediate direction but Australia Import and Export Price Index data for the second quarter (Q2) will be the key during the Asian session. Following that, the preliminary readings of US Q2 GDP should be eyed for fresh impulse. Above all, sentiment-related headlines, mainly surrounding covid, stimulus and China, will be crucial as Fed and RBA both have recently disappointed markets.
Read: US Q2 GDP Preview: Economy to continue to expand at strong pace, eyes on FOMC
Technical analysis
In addition to the repeated failures to cross the 0.7400 hurdle, a downward sloping trend line from June 11, near 0.7390, also restricts short-term AUD/USD upside. Hence, the bears are bracing for the yearly low surrounding 0.7290.
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