• AUD/USD struggles to keep recovery moves above 0.7879 above 0.7900.
  • Powel matched expectations of reprinting cautious optimism, tried to placate reflation fears.
  • US data was up, Aussie preliminary trade figures disappointed but nothing was major, yields remain hesitantly elevated.
  • Australia’s Q4 Wage Price Index, risk catalysts in the spotlight.

AUD/USD eases towards 0.7900, currently around 0.7910, during the early Asian morning on Wednesday. The pair refreshed the highest level since February 2018 before declining to 0.7879 before a few hours. The following corrective move, however, couldn’t last longer beyond 0.7920.

Although global markets took a sigh of relief after Fed Chairman Jerome Powell’s half-year testimony refrained from any negative surprises, challenges on the road to recovery as well as downbeat fundamentals at home probe the AUD/USD bulls off-late. Also on the negative side is the jump in the global treasury yields and US stimulus gridlock.

Nothing clear for the bulls…

While trying to defend the Fed’s easy money policy, Powell didn’t sacrifice on flashing the odds of the rising inflation. However, the US central banker did say that there is a long way from achieving its objectives and that policy will remain accommodative until substantial progress is made. That should have been enough to tame the reflation worries and propel the equities but it couldn’t. Following Powell’s testimony, the US dollar nursed some of its earlier losses around a seven-week low while Wall Street benchmarks closed mixed for Tuesday.

The reason could be traced from mixed US and Aussie data as well as no major progress on the American covid relief package. US CB Consumer Confidence and housing market figures came in better than forecast for January while Australia’s preliminary trade data for last month marked a heavy drop in exports. Elsewhere, the US policymakers keep jostling with the much-awaited stimulus despite flashing signs of putting it on the floor this week.

It’s worth mentioning that the vaccine optimism joins further unlock news to keep the market sentiment mildly positive despite growing doubts on the economic recovery, except for China.

While the bond bears are catching a breather off-late, equities and commodities couldn’t also post any notable improvement. Hence, traders should wait for clearer direction.

In doing so, Australia’s fourth-quarter Wage Price Index, expected to rise 0.3% versus 0.1% prior on QoQ, as well as further clues on the US COVID-19 relief package can help in Asia.

Technical analysis

The tops marked on April 2018 and January 2021, around 0.7820-15, become the key for AUD/USD sellers to watch, before trying to battle the bulls eyeing the 0.8000 threshold.

 

  • AUD/USD struggles to keep recovery moves above 0.7879 above 0.7900.
  • Powel matched expectations of reprinting cautious optimism, tried to placate reflation fears.
  • US data was up, Aussie preliminary trade figures disappointed but nothing was major, yields remain hesitantly elevated.
  • Australia’s Q4 Wage Price Index, risk catalysts in the spotlight.

AUD/USD eases towards 0.7900, currently around 0.7910, during the early Asian morning on Wednesday. The pair refreshed the highest level since February 2018 before declining to 0.7879 before a few hours. The following corrective move, however, couldn’t last longer beyond 0.7920.

Although global markets took a sigh of relief after Fed Chairman Jerome Powell’s half-year testimony refrained from any negative surprises, challenges on the road to recovery as well as downbeat fundamentals at home probe the AUD/USD bulls off-late. Also on the negative side is the jump in the global treasury yields and US stimulus gridlock.

Nothing clear for the bulls…

While trying to defend the Fed’s easy money policy, Powell didn’t sacrifice on flashing the odds of the rising inflation. However, the US central banker did say that there is a long way from achieving its objectives and that policy will remain accommodative until substantial progress is made. That should have been enough to tame the reflation worries and propel the equities but it couldn’t. Following Powell’s testimony, the US dollar nursed some of its earlier losses around a seven-week low while Wall Street benchmarks closed mixed for Tuesday.

The reason could be traced from mixed US and Aussie data as well as no major progress on the American covid relief package. US CB Consumer Confidence and housing market figures came in better than forecast for January while Australia’s preliminary trade data for last month marked a heavy drop in exports. Elsewhere, the US policymakers keep jostling with the much-awaited stimulus despite flashing signs of putting it on the floor this week.

It’s worth mentioning that the vaccine optimism joins further unlock news to keep the market sentiment mildly positive despite growing doubts on the economic recovery, except for China.

While the bond bears are catching a breather off-late, equities and commodities couldn’t also post any notable improvement. Hence, traders should wait for clearer direction.

In doing so, Australia’s fourth-quarter Wage Price Index, expected to rise 0.3% versus 0.1% prior on QoQ, as well as further clues on the US COVID-19 relief package can help in Asia.

Technical analysis

The tops marked on April 2018 and January 2021, around 0.7820-15, become the key for AUD/USD sellers to watch, before trying to battle the bulls eyeing the 0.8000 threshold.

 

Lo que necesita saber el miércoles 24 de febrero:

El dólar estadounidense mantiene su tono amargo en el mercado de divisas, pero terminó el día de manera desigual. Se apreció frente al CHF, el JPY y el EUR, pero cayó frente al GBP, el AUD y el CAD, que alcanzaron nuevos máximos anuales frente al dólar.

Wall Street cayó en la apertura en medio de una venta masiva liderada por acciones de tecnología, pero recortó la mayoría de sus pérdidas iniciales antes del cierre después de que el jefe de la Reserva Federal de Estados Unidos, Jerome Powell, testificara sobre política monetaria ante el Congreso.

Powell dijo que se necesitaría tiempo para “avances sustanciales adicionales” hacia las metas del banco central sobre empleo e inflación, y agregó que cualquier cambio en el programa de compra de bonos se comunicará “con mucha anticipación”. También reconoció que están llegando mejores datos, pero reiteró que la recuperación económica se desaceleró en los últimos meses.

 El gobernador del Banco de Canadá, Tiff Macklem, dijo que el país tardará algún tiempo en ver una recuperación económica completa y volver a los niveles prepandémicos, y explicó que no están allí. Agregó que espera tener una inmunidad generalizada contra COVID-19 para fin de año.

En el Reino Unido, los datos sobre empleo fueron mixtos, pero en su mayoría alentadores. La tasa de desempleo de la OIT alcanzó el 5.1%, como se esperaba, en los tres meses hasta diciembre. Las ganancias promedio incluyendo bonificación en el mismo trimestre aumentaron un 4.7%, superando el 4.2% esperado. Además, el número de desempleados disminuyó en 20.000 en enero, mucho mejor que el aumento de 35.000 previsto.

Las materias primas cayeron, pero se alejaron de los mínimos diarios. El oro cotiza a 1.805,00$ la onza troy, mientras que el WTI ronda los 62.00$ el barril.

Lo que necesita saber el miércoles 24 de febrero:

El dólar estadounidense mantiene su tono amargo en el mercado de divisas, pero terminó el día de manera desigual. Se apreció frente al CHF, el JPY y el EUR, pero cayó frente al GBP, el AUD y el CAD, que alcanzaron nuevos máximos anuales frente al dólar.

Wall Street cayó en la apertura en medio de una venta masiva liderada por acciones de tecnología, pero recortó la mayoría de sus pérdidas iniciales antes del cierre después de que el jefe de la Reserva Federal de Estados Unidos, Jerome Powell, testificara sobre política monetaria ante el Congreso.

Powell dijo que se necesitaría tiempo para “avances sustanciales adicionales” hacia las metas del banco central sobre empleo e inflación, y agregó que cualquier cambio en el programa de compra de bonos se comunicará “con mucha anticipación”. También reconoció que están llegando mejores datos, pero reiteró que la recuperación económica se desaceleró en los últimos meses.

 El gobernador del Banco de Canadá, Tiff Macklem, dijo que el país tardará algún tiempo en ver una recuperación económica completa y volver a los niveles prepandémicos, y explicó que no están allí. Agregó que espera tener una inmunidad generalizada contra COVID-19 para fin de año.

En el Reino Unido, los datos sobre empleo fueron mixtos, pero en su mayoría alentadores. La tasa de desempleo de la OIT alcanzó el 5.1%, como se esperaba, en los tres meses hasta diciembre. Las ganancias promedio incluyendo bonificación en el mismo trimestre aumentaron un 4.7%, superando el 4.2% esperado. Además, el número de desempleados disminuyó en 20.000 en enero, mucho mejor que el aumento de 35.000 previsto.

Las materias primas cayeron, pero se alejaron de los mínimos diarios. El oro cotiza a 1.805,00$ la onza troy, mientras que el WTI ronda los 62.00$ el barril.

  • EUR/USD saw some choppiness but has largely stuck to the 1.2150 mark.
  • Comments from Fed Chair Powell for the most part did not shift the dial as to the market’s Fed policy expectations.

EUR/USD saw some choppiness around the time of the US equity cash open and during the first day of Fed Chair Jerome Powell’s semi-annual testimony to Congress but has for the most part not traded too far from the 1.2150 mark, which has acted as an anchor of sorts. At present, the pair trades flat on the day.

Driving the day

The euro has traded almost entirely at the behest of the US dollar on Tuesday amid a lack of any meaningful fresh Eurozone-related fundamental catalysts. Broadly speaking though, the currency continues to underperformer the likes of GBP and other risk-sensitive currencies, likely in part because of continued concerns over the bloc’s sluggish vaccine rollout and concerns about the spread of worrisome Covid-19 variants; German Chancellor Angela Merkel is said to have warned her parliamentary party that the country is in the grips of a third Covid-19 wave.

Turning to USD flows then, which dictated the action in EUR/USD for the most part on Tuesday. A stronger than expected US Conference Board Consumer Confidence February survey, which saw the headline index rise to 91.3 versus analyst expectations of a modest drop to 90.0, was broadly ignored, with markets instead focused on what Fed Chair Jerome Powell had to say to Senators at his semi-annual testimony before Congress.

The Fed Chair stuck to the usual dovish FOMC script, which in essence had him reassuring investors and the public that, though the outlook for the economy is becoming more optimistic amid vaccine rollouts and fiscal stimulus, ultra-accommodative Fed policy is not going anywhere any time soon as the Fed remains a long way off of its dual mandate policy goals. In other words, Powell reiterated that rates will remain near zero until full employment has been reached and inflation has sustainably moved back above the bank’s 2% target, while the pace of bond buying will not be reduced until “substantial” progress has been made towards these goals.

That Powell would reiterate the above was very much expected and came as a surprise to no one. Rather, markets were much more focused on what the Fed Chair would have to say about the recent ramp higher in US bond yields and on inflation; on the former, Powell did not express any concern and instead attributed the move to positive fundamental developments (i.e. expectations for higher GDP growth and inflation), perhaps a little less dovish of a stance than some had hoped. However, Powell came across as dovish on his outlook for inflation and played down fears that the US economy might overheat in the coming years.

In terms of what the above all means for the question as to when the Fed will start to taper its QE programme, Powell’s comments have not exactly left markets much the wiser. ING suspects that, “given the fears of a potentially disruptive taper tantrum 2.0, we strongly suspect that when the Fed does start to taper asset purchases it will be gradual and involve a “twist” operation, similar to how the Bank of Canada’s policy has evolved.”

ING reminds us that that the BoC “recalibrated” its QE program by lowering its weekly asset purchases from CAD 5B to CAD 4B but shifting purchases towards the longer end of the yield curve, something which they argued was a more effective use of resources since the long end of the curve has a “more direct influence on the borrowing rates that are most important for households and businesses”.

“Given (this) option there is no reason to think that tapering couldn’t happen before the end of the year”, posits ING, though they do not think that the taper will result in a “taper tantrum 2.0”.

 

  • EUR/USD saw some choppiness but has largely stuck to the 1.2150 mark.
  • Comments from Fed Chair Powell for the most part did not shift the dial as to the market’s Fed policy expectations.

EUR/USD saw some choppiness around the time of the US equity cash open and during the first day of Fed Chair Jerome Powell’s semi-annual testimony to Congress but has for the most part not traded too far from the 1.2150 mark, which has acted as an anchor of sorts. At present, the pair trades flat on the day.

Driving the day

The euro has traded almost entirely at the behest of the US dollar on Tuesday amid a lack of any meaningful fresh Eurozone-related fundamental catalysts. Broadly speaking though, the currency continues to underperformer the likes of GBP and other risk-sensitive currencies, likely in part because of continued concerns over the bloc’s sluggish vaccine rollout and concerns about the spread of worrisome Covid-19 variants; German Chancellor Angela Merkel is said to have warned her parliamentary party that the country is in the grips of a third Covid-19 wave.

Turning to USD flows then, which dictated the action in EUR/USD for the most part on Tuesday. A stronger than expected US Conference Board Consumer Confidence February survey, which saw the headline index rise to 91.3 versus analyst expectations of a modest drop to 90.0, was broadly ignored, with markets instead focused on what Fed Chair Jerome Powell had to say to Senators at his semi-annual testimony before Congress.

The Fed Chair stuck to the usual dovish FOMC script, which in essence had him reassuring investors and the public that, though the outlook for the economy is becoming more optimistic amid vaccine rollouts and fiscal stimulus, ultra-accommodative Fed policy is not going anywhere any time soon as the Fed remains a long way off of its dual mandate policy goals. In other words, Powell reiterated that rates will remain near zero until full employment has been reached and inflation has sustainably moved back above the bank’s 2% target, while the pace of bond buying will not be reduced until “substantial” progress has been made towards these goals.

That Powell would reiterate the above was very much expected and came as a surprise to no one. Rather, markets were much more focused on what the Fed Chair would have to say about the recent ramp higher in US bond yields and on inflation; on the former, Powell did not express any concern and instead attributed the move to positive fundamental developments (i.e. expectations for higher GDP growth and inflation), perhaps a little less dovish of a stance than some had hoped. However, Powell came across as dovish on his outlook for inflation and played down fears that the US economy might overheat in the coming years.

In terms of what the above all means for the question as to when the Fed will start to taper its QE programme, Powell’s comments have not exactly left markets much the wiser. ING suspects that, “given the fears of a potentially disruptive taper tantrum 2.0, we strongly suspect that when the Fed does start to taper asset purchases it will be gradual and involve a “twist” operation, similar to how the Bank of Canada’s policy has evolved.”

ING reminds us that that the BoC “recalibrated” its QE program by lowering its weekly asset purchases from CAD 5B to CAD 4B but shifting purchases towards the longer end of the yield curve, something which they argued was a more effective use of resources since the long end of the curve has a “more direct influence on the borrowing rates that are most important for households and businesses”.

“Given (this) option there is no reason to think that tapering couldn’t happen before the end of the year”, posits ING, though they do not think that the taper will result in a “taper tantrum 2.0”.