Today, AUD/USD has gained more than 65 pips. There were several factors that triggered the move starting from Janet Yellen’s testimony and ending with Australian inflation data.
Yesterday, the markets watched the Yellen’s testimony in Congress, and everybody was waiting for very hawkish comments. Janet was optimistic but not enough to convince investors the rate hike was coming soon.
And then “buy the rumors – sell the facts” scenario worked perfectly, putting USD under broad based pressure. The biggest winners were commodity currencies, including AUD and NZD due to a more attractive rate differential. Following Ms Yellen’s remarks on Thursday, the yield on U.S. 10-Year Treasuries touched the lowest level in a week!
Coming back to AUD/USD moves, we need to say about Consumer inflation expectation data released early Asia. The July numbers were much higher than the previous month (4.4% vs 3.6% in July). And this gives the Reserve Bank of Australia the reason leave the rates unchanged, if not to hike.
But all of this is already priced in, and digested by the market. Meanwhile, AUD/USD comes closer to annual range roof. The upper limit of 0.7160 – 0.7740 range will not be so easy to break through. We recommend to wait until the price starts correction, and enter the market with shorts on AUD/USD with the nearest target at 0.77 followed by 0,7660.