Aud Strong Before Fedspeak

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Aud Strong Before Fedspeak

Australian Dollar (Aud) Strong Before Fedspeak

The Australian Dollar (AUD) is in the recovery phase and has already recovered most of its daily losses. However, the only problem with this recovery is the rebound in the USD. It appears that the spark of demand for USD was driven by Fed Kugler's hawkish speech.

Dr. Kugler confirmed that the inflation levels have gone down, but he still cited the need for more data before committing to a rate cut. He also made it clear that if the future data shows any resurgence of inflation or slower progress of disinflation, then the rate cuts will be delayed.

Rba To Maintain The Interest Rate

To put it short, Dr. Kugler has said the same thing as all the other Fed speakers in the past. What's strange is that the data shows a consistent trend of disinflation, but Fed officials keep talking about some kind of confirmation. At this stage, it is anyone's guess on what that confirmation really is!

Coming back to the AUD/USD pair, investors have lowered their expectations of a rate hike from the Reserve Bank of Australia. However, that's not a problem as the RBA is likely to delay the rate cutting cycle.

Looking ahead, the key focus of the investors will be the Australian jobs report which will also have major implications for the monetary policy. On the US side, the Fed Beige Book will be watched along with the speeches from Fed Waller and Fed Barkin.

The AUD/USD pair is trading near 0.6740, with the next resistance at 0.6750 and the nearest support at the 0.6700 handle. The D1 chart also shows that the AUD/USD is going through consolidation inside an ascending channel pattern.

Given the recent price action, there's a good chance that AUD/USD will likely test the 0.6800 on account of AUD strength.

But if the dynamic support at 0.6710 is lost to the bears, it would mean that the AUD/USD will move down to the 0.6700 handle.

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