AUD/USD Bounces as US Dollar Digests Powell Pivot and Data Beat. Where To From Here?

Australian Dollar, AUD/USD, Crude Oil, US Dollar, DXY, Fed, Powell - Talking Points

• AUD/USD rallied in Asia as risk appetite recovered post-Powell
• APAC equities were mainly higher, crude still vulnerable before OPEC+
• Yields and base metals found higher ground. Can AUD/USD catch a bid?

The Australian Dollar rejected a new low for the year as the fall-out from Federal Reserve Chairman Jerome Powell’s testimony to the Senate Banking Committee continues.

US Treasuries continue to see higher yields in the Asian session, particularly in the short-end, with the 2-year bond trading above 0.60%.

Mr Powell said that the economy is strong and inflationary pressures are high. He looked at the next Fed meeting for a discussion to wrap up the asset purchasing program a few months earlier than previously anticipated. In his remarks, he retired the reference to ‘transitory’ inflation.

The US Dollar Index (DXY) initially spiked higher on the comments but pulled back to near where it was before the testimony. On that USD rally, AUD/USD hit a new low for 2021 but then spent the ensuing hours recovering.

The Australian Dollar then got a boost after third quarter GDP numbers came in at -1.9% for the three months through September, above expectations of -2.7%. The annual number was 3.9% against forecasts of 3.0%.

Iron ore prices also rose again today and are now more than 18% above the lows seen last month. Other base metals had small gains in Asia.

WTI crude oil continues to remain under pressure below US$68 a barrel, a long way from US$78 a barrel prior to the Omicron variant outbreak news.

The discussion at the OPEC+ meeting on Thursday might shift away from concerns about the release of strategic petroleum reserves and focus on the possible impacts of the new mutation of Covid-19. A cut in output could still be on the table.

APAC equities shrugged off the negative Wall Street lead to be mostly positive on the day. Korea’s Kospi index was the best performer while Australia’s ASX 200 was slightly down.

Later today, the US will see data on mortgages, jobs, construction and manufacturing PMI. We are also due to hear from Federal Reserve Chair Jerome Powell and US Treasury Secretary Janet Yellen again.

AUD/USD Technical Analysis

AUD/USD bounced off a 1-year low in the last session and the previous low at 0.71062 might now provide a point of support. The low seen at 0.70626 could also be a support level.

The price is currently below all short, medium and long-term simple moving averages (SMA). This may suggest that bearish momentum might continue to evolve.

On the topside, potential resistance might lie at the pivot point and previous highs of 0.71705, 0.72735 and 0.73707.

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter