AUD/USD, ASX 200 Analysis: The US dollar falls after Powell’s testimony

Market summary

• Jerome Powell told congress that rates will need to move higher to tame inflation via lower growth, adding that the speed (of hikes) was more important at the start but not important now
• Wall Street pulled back for a third day although the lack of bearish follow through suggests some were expecting something more hawkish from Powell
• An intraday double bottom formed on the S&P 500 ~4360 and the Nasdaq 100 held above 14,800

   

• The US dollar was the weakest FX major
  • EUR/USD closed to a 6-week high and is less than 20 pips from testing 1.1000
  • USD/CAD closed to a 9-month low
  • USD/CHF formed a likely swing high around 0.9000 ahead of today’s SNB meeting
  • AUD/USD formed a bullish hammer day

   

• Stubbornly high UK inflation keeps the pressure on an already-hawkish BOE, with core CPI a 31-year high of 7.1% y/y (0.8% m/m)
  • The 1-year OIS (overnight index swap) now fully pricing in a 5.75% interest rate, which leaves room for five 25bp hikes from the current 4.5%
  • GBP/USD spiked up to our initial 1.028 resistance zone, before reversing and retesting Tuesday’s low as traders mulled the increasing likelihood of a hard landing for the UK economy

   

• Strong retail sales data for Canada has increased bets the BOC could hike again in July and sent USD/CAD to a 9-month low
• Australia’s Treasurer announced that they intend to finalise the appointment of the next RBA governor by July

Events in focus (AEDT):

• 09:50 – JP foreign investment, BOJ member Noguchi speaks
• 18:00 - SNB meeting
• 21:00 - BOE meeting

ASX 200 at a glance:

AUDUSD daily chart:

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

1. Open an account, or log in if you’re already a customer 
   
   • Open an account in the UK
   • Open an account in Australia
   • Open an account in Singapore
   
   
2. Search for the market you want to trade in our award-winning platform 
3. Choose your position and size, and your stop and limit levels 
4. Place the trade