- AUD/USD fades recent modest gains amid a lack of strong catalyst to the north.
- Easing of US Treasury yields favored equities amid Fed policymakers’ attempt to reject reflation fears.
- Virus, vaccine jitters continue ahead of the key Testimony from Fed Chair Powell and Treasury Secretary Yellen.
AUD/USD struggles to extend the latest recovery moves around 0.7750, recently easing from 0.7758 to 0.7745, amid the early Tuesday morning in Asia. The pair began the week on the back foot amid reflation fears but the easing of the US Treasury yields helped soothe the pains afterward. Though, a lack of major data/events, as well as pre-key catalyst cautious mood, seems to weigh on the quote off-late.
Inaction ahead of Powell-Yellen testimony…
Economic recovery hopes and the Fed’s readiness to let the Supplementary Leverage Ratio (SLR) concessions expire brightened the market mood on Monday, after a dismal start to the week on the coronavirus (COVID-19) and vaccine woes. Also helping the sentiment was the drop in the US Treasury yields and a lack of major negatives on the economic front. However, the optimism couldn’t last long as a mixed approach by the Treasury and the Fed keeps traders cautious ahead of this week’s testimony from Fed Chair Jerome Powell and Treasury Secretary Janet Yellen.
In a latest prepared remarks, to be repeated in front of the Congress, Fed Chair Jerome Powell said, Fed will continue to support the economy “for as long as it takes”. However, his comments on the employment and economic recovery suggest cautious optimism but fail to derail the latest positive performance of the markets.
On the contrary, the virus woes probe market bulls and so do the vaccine tussles between the European Union (EU) and the UK, not to forget geopolitical tension in the Middle East and the US-China tension.
Amid these plays, US 10-year Treasury yields dropped 3.7 basis points to revisit the sub-1.7% region after refreshing the multi-month top on Friday. The same helped Wall Street benchmarks to close Monday’s trading on a positive side.
Looking forward, AUD/USD traders will seek clues to confirm no challenges to easy money policy amid a dearth of data/events at home. In doing so, today’s testimony from Powell and Yellen will be the key.
Technical analysis
AUD/USD sellers can stay hopeful unless refreshing the early month top near 0.7840 while 21-day EMA close to 0.7755 guards immediate upside. On the contrary, the 50-day EMA around 0.7720-15 and an ascending trend line from December 21, 2020, near 0.7670, adds to the downside filters.