Attention shifts to Powell’s testimony

The greenback tended to edge lower against its counterparts yesterday as market attention turns towards Fed Chairman Powell’s testimony before the US Senate later today and please note that the statement may be released by the Fed ahead of the testimony. The Fed Chairman may opt to remain hawkish stating that the fight against inflation is still not over and that the bank may have to do more in order to curb inflationary pressures in the US economy. Should that be the case, and should he sound also confident and more aggressive, while he is grilled by questions from US lawmakers, we may see the USD getting some support as the market may have to reposition itself. On the flip side, the Fed Chairman may opt not to commit the bank to any monetary policy path in order to keep the bank’s options open given that the CPI and employment data for February are still to be released. Across the world, as was widely expected RBA hiked rates by 25 basis points, raising the cash rate from 3.35% to 3.60%. In Governor Lowe’s accompanying statement, the bank stated that the CPI rate may have peaked and also noted that growth for the Australian economy has slowed down, while the Australian employment market remains very tight. There was though a slight change of wording in its forward guidance, as it stated that “The Board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary…”. That tended to show an easing of its hawkishness, as in its previous forward guidance the bank was determined that more rate increases were required and thus tended to disappoint Aussie traders turning the rate hike into a dovish hike that weakened AUD upon release. Overall, should we note that this easing of the bank’s hawkishness is to be reflected also in statements of RBA policymakers, we may see AUD slipping further and thus we highlight Governor Lowe’s speech as tomorrow’s Asian session starts. Finally, in Europe we note the acceleration of the Swiss CPI rates for February accelerated both on a month-on-month as well as on a year-on-year level, which could sharpen the hawkishness of the Swiss National Bank which could keep the Franc supported on a monetary level. 

AUD/USD edged lower yesterday aiming for the 0.6695 (S1) support line. Please note that the movement forced us to recalibrate the pair’s supports and some resistance lines. Overall, we tend to maintain a bias for the sideways motion to continue, yet we highlight that the RSI indicator is nearing the reading of 30 implying that the bears may be taking over the market sentiment for the pair. Should a selling interest be actually expressed by the market for the pair, we may see AUD/USD breaking the 0.6695 (S1) support line and aim for the 0.6590 (S2) level. On the flip side should the pair find fresh buying orders along its path, we may see AUD/USD reversing course, breaking the 0.6785 (R1) resistance line and aiming for the 0.6900 (R2) level.

USD/CHF continued to drop breaking the 0.9325 (R1) support line, now turned to resistance. We tend to maintain our bearish outlook for the pair as long as its price action remains below the downward trendline mentioned. Should the bears maintain control over USD/CHF, we may see it breaking the 0.9280 (S1) support line and aiming for the 0.9220 (S2) support level. Should the bulls take over, we may see USD/CHF reversing course, breaking the prementioned downward trendline in a first signal of a changing trend, breaking also the 0.9325 (R1) resistance line and aiming for the 0.9380 (R2) resistance level.       

Other highlights for the day:

Today in the European session, we note the release of UK’s Halifax House prices for February while we also get Germany’s industrial orders for January. In the American session, oil traders may be more interested in the release of the API weekly crude oil inventories figure. During tomorrow’s Asian session, we note the release of Japan’s current account balance for January.

USD/CHF H4 Chart

Support: 0.9280 (S1), 0.9220 (S2), 0.9160 (S3)

Resistance: 0.9325 (R1), 0.9380 (R2), 0.9440 (R3)

AUD/USD H4 Chart

Support: 0.6695 (S1), 0.6590 (S2), 0.6520 (S3)

Resistance: 0.6785 (R1), 0.6900 (R2), 0.7010 (R3)

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