AUD/USD reverses gains from near 0.7950 as S&P 500 futures drop

• AUD/USD turns south in tandem with S&P 500 futures.
• RBA Harper’s exchange rate comments also weigh on the aussie.
• Dovish Fed’s Powell fails to keep the bulls supported.

AUD/USD consolidates its retreat from three-year highs of 0.7945, having reversed most gains, as the turnaround in the risk sentiment lifted the haven demand for the US dollar.

At the time of writing, the aussie trades at 0.7912, up 0.05% on a daily basis, defending the 0.7900 as we head towards the European opening. 

The worsening of the market mood, as markets weighed in the risks of rising inflation worldwide. The greenback finds its feet across its main peers while the S&P 500 futures drop 0.50% to near 3,860 levels.

Adding to the weight on the aussie, the Reserve Bank of Australia (RBA) board member Ian Harper expressed his concerns on the appreciation of the Australian dollar. Harper said, “even with Australia’s borders closed for almost a year now, shutting down the country’s top services exports of international education and tourism, currency appreciation is still a worry.”

The downside in the spot, however, remains cushioned by the NZD/USD rally to multi-month highs, fuelled by the Reserve Bank of New Zealand’s (RBNZ) hinted towards tightening after lifted its forecast for the unconstrained OCR.

Commodities hold their recent advance, which also lends support to the resource-linked aussie, as investors pay a little heed to the mixed Australian wages and construction output data.

Meanwhile, the US dollar is attempting a tepid bounce from the Fed Chief Powell’s dovish blow. Powell highlighted, in his Tuesday’s testimony, the economic recovery remains uneven and reiterated the need to maintain an accommodative monetary policy stance unless its employment and inflation goals are met.

In the day ahead, round 2 of Powell’s testimony will be closely eyed alongside a slew of Fedspeak, as the US docket remains scarce on the data front.

AUD/USD: Technical outlook

“Counter-trend traders eye further consolidation of the latest gains towards 0.7815-20 horizontal area, comprising highs marked in early 2018 and during the last month. Meanwhile, bulls need to reject the downtrend suggesting candlestick formation by a daily closing above 0.7940 to keep the reins. Following that, February 2018 peak surrounding 0.7990 can test the run-up targeting the 0.8000 threshold, FXStreet’s Analyst Anil Panchal notes.

AUD/USD additional levels