AUD/USD: Rebound from yearly low pauses around 0.7550 amid mixed Fedspeak

  • AUD/USD struggles to keep corrective pullback from year’s low.
  • Market sentiment remained positive as Fed policymakers jostle reflation, rate hike woes.
  • US Treasury yields recover from four-month low, Wall Street benchmarks gain as well.
  • Light calendar in Asia highlights risk catalyst for fresh impulse, US data, Powell’s testimony will be the key.

AUD/USD bulls await fresh clues to extend the recovery moves from the yearly low around 0.7550 during the early Tuesday morning in Asia. The Aussie pair not only began the week on the front foot to rebound from a six-month low but also snapped a four-day downtrend, not to forget posting the heaviest daily gains in two weeks, amid risk-on mood. While the economic calendar wasn’t so encouraging its seems the Federal Reserve (Fed) speakers, commonly known as Fedspeak, played their part to restore the market’s optimism.

Fedspeak is the key…

Fed Chairman Jerome Powell’s prepared remarks for today’s Testimony confirm the market expectations that the policymaker terms inflation risk as transitory and causing no major challenges to the present monetary policies. The Fed Boss also flaunts the availability of tools with the US central bank if needed to use.

On the other hand, New York Fed President John C. Williams takes multiple turns in his latest speech that recently mentioned that Fed is talking about talking tapering. Dallas Fed President Robert Kaplan was on the same line while favoring “taking the foot off the accelerator sooner rather than later.”

Furthermore, St. Louis Fed President James Bullard sounded a bit calmer while saying that the low interest rates and low inflation rate era are not ending any time soon.

Global markets cheered the Fed policymakers’ efforts to placate rate hike woes during the first day of the week. The upbeat market mood also gained support from progressing talks over the US President Joe Biden’s infrastructure spending and upbeat Chicago Fed National Activity Index, from downwardly revised -0.09 to +0.29 in May.

It’s worth noting that the preliminary readings of Aussie Retail Sales for May eased below market consensus and prior to 0.1% whereas the People’s Bank of China (PBOC) kept its benchmark rate unchanged the previous day. Both these events failed to offer any notable moves of the AUD/USD prices.

Against this backdrop, US Treasury yields mark a stellar rebound from a four-month low whereas the US equities also posted notable gains by the end of Monday’s North American trading session.

Looking forward, a lack of major data will push AUD/USD traders to recall Fedspeak and search for sentiment-related headlines for fresh impulse ahead of the US session. Following that, US Existing Home Sales for May and Richmond Fed Manufacturing Index for June may entertain market players ahead of Fed Chair Powell’s testimony. As the prepared remarks have already backed the major consensus of no surprises, the US dollar pullback may extend should Powell chose to keep taming the policy hawks.

Technical analysis

AUD/USD pair’s corrective pullback needs to cross the 200-day SMA level around 0.7560 to restore the bull’s confidence.

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