AUD/USD has recovered nicely from the selloff in risk-on currencies on the back of the Fed meeting last week, but the pair is struggling to overcome bearish pressure at 0.7555. Powell’s statement to Congress yesterday served to put a dent in the US Dollar’s bullish reversal as his statement was taken as being dovish once again.
It could be that the FOMC views the reaction to their updated dot plot projections as too hawkish for their liking and they are trying to center the rhetoric around transitory inflation once again. For Powell and Williams the job data is still of concern as there seems to be a reluctance to return to work despite a large increase in vacancies.
A continued dovish message from the Fed will likely underpin AUD/USD performance as commodity-linked riskier currencies outperform the US Dollar. My projection in this case would be for the pair to trade above 0.76 in the coming weeks, likely holding to a range as we saw back in March and April this year.
