US Greenback Could Prolong Upward as Powell Reiterates Coverage Pivot

US Greenback Could Prolong Upward as Powell Reiterates Coverage Pivot

US DOLLAR, POWELL, INFLATION, FED, AUD/USD – TALKING POINTS:US Greenback up as June’s fiery CPI report stokes bets on stimulus unwind Fed Chair Po

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US DOLLAR, POWELL, INFLATION, FED, AUD/USD – TALKING POINTS:

  • US Greenback up as June’s fiery CPI report stokes bets on stimulus unwind
  • Fed Chair Powell prone to reiterate anti-dovish pivot in coverage steerage
  • AUD/USD might break key help close to 0.74, beckoning deeper losses

The US Greenback returned to the offensive yesterday after June’s CPI report topped forecasts, stoking bets on an accelerated timeline for financial stimulus withdrawal (as anticipated). Extra of the identical could also be in retailer because the highlight now turns to semi-annual Congressional testimony from Fed Chair Jerome Powell.

The central financial institution chief will sit earlier than the Home of Representatives’ Monetary Providers committee in the present day and return for a repeat efficiency within the Senate tomorrow. Inflation is prone to be entrance and middle, particularly after June’s banner surge to a 13-year excessive of 5.four p.c on-year.

Powell steered the Fed by an unmistakable pivot away from dovish extremes eventually month’s coverage assembly. He clearly delivered the message that value progress had exceeded officers’ forecasts and introduced up to date forecasting introducing 50bps in fee hikes in 2023.

Since then, a gentle steam of feedback from Fed policymakers highlighted the change of their pondering. Most supplied some taste of admission that the time has come to plot an exit from the ultra-loose posture adopted amid the Covid-19 outbreak. Some referred to as for fee hikes as quickly as subsequent 12 months.

That is nearly definitely by design. The Fed is conscious about the ability its phrases have, and takes nice care to wield them strategically. It isn’t within the behavior of introducing a guiding narrative and constructing it out by quite a few officers’ speeches solely to out of the blue change its thoughts.

Mr Powell is thus prone to ship in sort. He will certainly modulate his phrases akin to to keep away from channeling a way of urgency, however is nonetheless prone to clarify that the Fed acknowledges the inflationary menace and means to do one thing about if want be. This may increasingly encourage the Dollar increased nonetheless.

AUD/USD TECHNICAL ANALYSIS – SELLERS GRAPPLE WITH KEY LEVEL AT 0.74

One other bout of US Greenback power might see AUD/USD puncture key help clustered across the 0.74 determine. A each day shut beneath 0.7384 expose the 0.7222-44 inflection zone on route towards the 0.7120-30 goal implied by a just lately accomplished Head and Shoulders topping sample.

Constructive RSI divergence warns that draw back momentum could also be ebbing nevertheless. It’s unclear as but whether or not this speaks to on-coming reversal increased or merely deceleration after the explosive selloff in mid-June. Reclaiming a foothold above 0.75 might communicate to the previous, opening the door to check 0.76 subsequent.

US Dollar May Extend Upward as Powell Reiterates Policy Pivot

AUD/USD each day chart created withTradingView

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— Written by Ilya Spivak, Head Strategist, APAC at DailyFX.com

To contact Ilya, use the feedback part under or @IlyaSpivak on Twitter

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