AUDUSD TECHS: Fresh Cycle High
Jun-06 19:30
* RES 4: 0.6603 High Nov 11 '24 * RES 3: 0.6582 High Nov 12 '24 * RES 2: 0.6550 61.8% retracement of...
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FOREX: Greenback Extends Session Highs as Fed Awaits Further Clarity
May-07 19:24
- The US dollar is firmer on Wednesday, as the USD Index continues a consolidatory phase between 99.00/100.00. Losses in G10 have been most pronounced for the likes of JPY, AUD and NZD, while the Swiss Franc has reversed yesterday’s weakness and is among the best performers Wednesday.
- USDJPY remained the key focus for FX volatility on Wednesday, where initially a positive reaction to US/China talks progress prompted a firm recovery from the 142.40 lows to around 143.20 overnight in Asia. Following the release of the Fed statement, some dovish caveats and comments from Trump on not rolling back China tariffs saw USDJPY briefly slip back below 143.00. However, this sentiment was short-lived, and Chair Powell’s nod to a patient approach and awaiting further clarity prompted a swift reversal to fresh session highs. The pair is pushing 143.85 as we approach the APAC crossover.
- For AUDUSD, today’s 1.0% decline stalls a prior 3-day winning streak that prompted the pair to print fresh recovery highs at 0.6515. The recent breach of 0.6450, the Apr 29 high, confirms a resumption of the uptrend and maintains the current sequence of higher highs and higher lows.
- Late gains for the dollar helped EURUSD slip to session lows just above the 1.13 handle, whole cable also now trades below 1.33.
- The Swiss Franc notably outperforms on a relative basis. We have noted that recent recovery highs for USDCHF matched perfectly with the prior breakdown point of 0.8333, the 2023 low, likely helping the resumption of weakness in recent sessions. Furthermore, the pair briefly dipped below a couple of daily lows from late April around the 0.8200 mark, keeping bearish conditions firmly intact for now.
- Focus on Thursday turns to other G10 central banks, with decisions from Sweden, Norway and the Bank of England all scheduled. Jobless claims highlight the US calendar.
FED: Powell Says FOMC Has Policy in Good Place, Q&A Ends
May-07 19:22
- Q: You mentioned earlier that you were monitoring the shipping data and we have seen in the shipping data the imports from China into the port of Los Angeles have plunged. And that has raised concerns about potential shortages. What tools, if any, does the Fed have to ensure that prices and inflation expectations don't get out of hand if tariffs do cause significant supply chain disruptions?
- A: We don't have the kind of tools that are good at dealing with supply chain problems. That's a job for the administration and for the private sector more than anything. What we can do with our interest rate tool is we can be more or less supportive of demand and that would be a very inefficient way to try to fix supply chain problems. But we don't see the inflation yet.
- Q: Public records of your schedule so far this year show no meetings with President Trump, past presidents Obama, Bush and Clinton med with Fed chairs and you met with trump during his first term. Why haven't you asked for a meeting yet with the president.
- A: I have never asked for a meeting with any president and I never will. I wouldn't do that, there's never a reason for me to ask for a meeting. I think it's always comes the other way, a president wants to meet with you but that hasn't happened.
- Q: When it is time to cut rates, how will you determine how far rates will have to come to try to keep a balance on the inflation mandate as employment weakens?
- A: I think once you have a clear direction, you can make judgment about how fast to move and that kind of thing. So, it's really the harder question is the timing, and when will that become clear. And fortunately as I mentioned, we have our policy in a good place, the economy is in a good place, and it's really appropriate, we think, for us to be patient and wait for things to unfold, as we get more clarity about what we should do.
- Q&A Ends
FED: Powell Reiterates the FOMC Can Afford to be Patient
May-07 19:18
- Q: We talked about some of the occasions of potential layoffs, price hikes and economic slowdown all be evident in the soft data. I'm curious why the Fed needs to wait for that to translate into hard data to make any type of monetary policy decision, especially if the hard data is not as timely or might be warped by tariff-related effects. Are you worried that the soft data might be some sort of false warning?
- A: No. Look at the state of the economy. The labor market is solid. Inflation is low. We can afford to be patient as things unfold. There's no real cost to our waiting at this point.
- Q: There was this sort of vibe-cession, if you will, where the sentiments expressed in soft data did not translate into the hard economic data. How are you thinking about that when interpreting some of the signs in the softer survey data?
- A: I think going back a number of years, the link between sentiment data and consumer spending has been weak. It's not been a strong link at all. On the other hand, we haven't had a move of this speed and size. So, it wouldn't be the case that we are looking at this and just completely dismissing it. But it's another reason to wait and see.
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