AUD in focus ahead of Yellen testimony

We are finally starting to see some moves in the major FX space after a lacklustre performance in yesterday’s trade.

AUD notes
Source: Bloomberg

Presumably this is to do with some positioning heading into Janet Yellen’s testimony. AUD/USD remains within striking distance of the 0.9400 handle and will be an interesting to watch yet again heading into the RBA monetary policy meeting minutes due out at 11.30 AEST. These will just help elaborate on the central bank’s position after the perceived more dovish statement following the last meeting. While further jawboning is likely, in recent times, AUD weakness has not lasted long at all with the currency swiftly returning to its pre-jaw boning levels every time it’s talked down.

We also have new motor vehicle sales due out and might even get China data. New loans and M2 money supply data is pencilled in for today or tomorrow. While it looks like the pair could pop higher in the near term, there is a good chance we could see traders looking to sell into strength ahead of Yellen’s testimony.

Two key issues to look for from Yellen’s testimony will be the labour market and any slack that remains in the labour market. Some analysts actually feel we should look at the employment to population ratio as it is a more realistic indication of the job situation. Participation remains low in the US and as a result some of the slack in the jobs market might not be properly accounted for. Should we see a push higher in AUD/USD in Asia then we could see some selling as we head into US trade.

There are already some key releases on the US economic calendar including retail sales and the Empire State manufacturing index. Strong readings could fan the greenback higher before Janet Yellen comes on line.

Downtrend could cap USD/JPY

USD/JPY has been rising heading into Janet Yellen’s testimony later today. Some analysts feel Yellen might shift from her usually dovish stance to a more balanced tone after recent comments from other Fed members pointed towards finding a median from the committee’s opinion. While the price action on USD/JPY remains bearish, it seems traders remain reluctant to push it much lower due to the BoJ put.

The BoJ meets today and while no chance is expected, there is always a risk we’ll see some volatility on the commentary. There is a downtrend which comes in at around 102.80 and this could cap gains in the pair yet again.

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