Originally published by AxiTrader
The Australian dollar was sitting at 0.7853 this morning.
That's marginally stronger on the day but around 40 pips lower than the high overnight of 0.7893 which was reached when the US dollar selling in Asia intenisfied as European traders entered the fray.
The reality is that on this basis the Aussie rally, while conforming to expectations expressed yesterday that a break of 0.7847/58 could see a run toward 0.7902, is really just ebbing and flowing with the US dollar's move at present while traders wait for Fed chair Jerome Powell's testimony on Capitol Hill tonight.
On that topic it is germane to the conversation about AUD/USD to repeat what I said about Powell's testimony earlier in Markets Morning. That is, what’s going to be interesting tonight as Powell is quizzed by lawmakers is how he frames the outlook for and strength of the US economy. That will be vital as the market parses his thoughts to garner even the slimmest of hints as to whether it’s 2, 3, 4, or more rate hikes by the FOMC this year.
My sense is he’ll play a straight bat. Or at least try to. But that it will be hard for him not to sound hawkish.
That should give the US dollar a bid tone which in turn should keep the AUD/USD offered.
Of course given this is a statement followed by a question and answer session with lawmakers keen to probe the new Fed chair and make their mark there remains plenty of scope for volatility on both sides of the bullish/bearish US dollar divide.
That being the case it might be worth looking at the 4 hour charts to gauge the levels traders might be eyeing over the next 24 hours or so.
Initially a -very tentative 2-touch - trendline which touches last night's high comes in at 0.7884 today in Asia. So this 0.7884, 93 and then 0.7902 level (the 38.2% retracement of the fall to 0.7758 recently) looks like there is a lot of wood to chop.
Above that is another tentative trendline around 0.7925/30 and then the 200 period (on the 4 hour chart) and 30 day EMA sit at 0.7936/38. The US dollar would need to fall out of bed to get the AUD/USD up and through here on the timeframe we are looking at.
Support is at 0.7798/7812 which contains the little trendline from the recent low. Below that its 0.7770/75 and then 0.7750.
Have a great day's trading.