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  • AUD/USD 21-D SMA gives out and bears are back in control.
  • US dollar stong on Powell’s testimony, sending commodity-fx to the sidelines.
  • A complete unwind of the two-year year-long reflation trade would open up a case for the 0.72 handle.

The dollar has been on a tear across the board and commodity-fx has been hit hard as industrial metals and gold crumble. AUD/USD has dropped below the 0.74 handle on Powell’s testimony today, reaching a low of 0.7385 from a high of 0.7438, (scored on a short squeeze in the kiwi).

Fed’s Powell: Gradually raising rates is way to extend U.S. Economic expansion

AUD/USD was better bid overnight after the RBA minutes claiming that the next move in rates is more likely to be up and also, on the heels of the New Zealand dollar’s advance on the back of NZ’s core inflation measure hitting a 7-year high. However, the bid was fragile considering that we have heard the RBA come with such rhetoric on a number of occasions and a rate hike is not expected any time soon and the minutes only gave a temporary support -(Minutes also highlighted Aus household debt and global trade risks).

The mixed messages actually had the Aussie down to test 0.7403. Also, another key concern in those minutes came from, “”Members noted that trade tensions extended beyond the United States and China, and could escalate through non-tariff measures such as administrative delays. An escalation of trade tensions could harm global growth by undermining confidence and delaying investment decisions and could dampen international trade.”

Ahead of Powell’s testimony before the Senate Banking Committee, AUD/USD was holding above the 0.74 handle with a strong bid in the kiwi supporting, keeping the Aussie above yesterday’s low at 0.7401, in line with the hourly100-SMA and the 21-D SMA (0.7394). However, these gave out as the dollar took off in late London.

AUD/USD levels

We have seen a dip below the 21-day MA at 0.7394 and technicals lean bearish with the RSIs biased down on a longer-term basis where 0.7300/20 comes in as a key target. should the trade war spat angst starts to become a more dominant theme we could see a complete unwind of the two-year year-long reflation trade. This would open up a case for the 0.72 handle. Below there comes the 0.7110/70 support zone. On the upside, we have resistance at the 55-day MA at 0.7487.