- AUD/USD fell sharply after jumping to fresh multi-month highs.
- US Dollar Index looks to close above 93.00 with modest daily gains.
- FOMC Chairman Powell introduced average inflation target as new strategy.
The AUD/USD pair fluctuated in a large range on Thursday and now looks to close the third straight day in the positive territory. As of writing, the pair was up 0.35% on the day at 0.7255.
Investors assess changes to the Fed's policy strategy
Wild swings witnessed in the US Dollar Index (DXY) caused AUD/USD to move sharply in both directions. The initial reaction to FOMC Chairman Powell's speech at the Jackson Hole Symposium dragged the DXY to a low of 92.42.
However, surging US Treasury bond yields during the American session provided a boost to the USD and allowed the DXY to jump above 93.30. With the market action turning subdued in the last hour, the DXY remains on track to end the day with modest gains above 93.00.
Powell announced that the Fed will adopt average target inflation as part of its new policy strategy and triggered a USD-selling wave. The chairman further clarified that any inflation overshoots will be moderate and helped US T-bond yields gain traction. Commenting on this announcement, Dallas Fed President Robert Kaplan explained that "moderate overshoot" of inflation means 2.25% or 2.5%. At the moment, the 10-year US T-bond yield is up 7.1% on the day at 0.736%.
Meanwhile, the US Bureau of Economic Analysis' second estimate showed that the real Gross Domestic Product (GDP) in the US contracted by 31.7%, compared to the initial forecast of 32.9%.
There won't be any significant macroeconomic data releases from Australia during the Asian session and the USD's market valuation is likely to remain the primary driver of AUD/USD's action.
Technical levels to watch for
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
USD/JPY drops toward 142.00 ahead of BoJ policy decision
USD/JPY has turned south, approaching 142.00 in the Asian session on Friday. Markets turn risk-averse and flock to the safety in the Japanese Yen while the Fed-BoJ policy divergence and hot Japan's CPI data also support the Yen ahead of the BoJ policy verdict.
AUD/USD bears attack 0.6800 amid PBOC's status-quo, cautious mood
AUD/USD attacks 0.6800 in Friday's Asian trading, extending its gradual retreat after the PBOC unexpectedly left mortgage lending rates unchanged in September. A cautious market mood also adds to the weight on the Aussie. Fedspeak eyed.
Gold price treads water below record peak, awaits Fedspeak
Gold price hovers below the all-time peak touched earlier this week amid a bearish US Dollar and rising bets for more upcoming rate cuts by the Fed. Concerns over an economic downturn in China keep the safe-haven Gold price afloat. Fedspeak remains on tap.
Bank of Japan set to keep rates on hold after July’s hike shocked markets
The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session.
XRP eyes gains as Ripple gears up for stablecoin launch, Grayscale XRP Trust notes rising NAV
Ripple (XRP) gained 2.3% since the start of the week. The altcoin’s gains are likely powered by key market movers that include Ripple USD (RUSD) stablecoin, Grayscale XRP Trust performance and the demand for the altcoin among institutional investors.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.