Major currencies continued their bounce against the dollar yesterday with the Aussie and Sterling breaking out of their previous important resistance. Fed Chairwoman Yellen maintained her dovish position in the testimony to the House Financial Services Committee. The USD retreated during the Asian trading hours and the European morning, but calmed itself later as Yellen’s testimony was recognised as fairly similar to her last one to the Senate.
As I have mentioned a couple of times before, 0.7850 is the critical resistant level to the AUD/USD. It thwarted many times of bulls’ attacks in the recent four weeks, but now the level has been broken out. The Australian Dollar has maintained its strength after Yellen’s first slight-dovish statement during the last day’s trading. Now the AUD/USD has stopped at 0.79 – another strong resistance. News outlets have reported that real-money buy orders had supported the AUD. However, the outlook of this currency pair is still bearish as there is no sign of rebound commodity prices and domestic economic activities remain weak. The above bull target is 0.80 and sell orders will resume if the pair falls back below 0.7850.
The Pound/Dollar also made its breakthrough in the early European morning, which is fairly in line with expectations that the recovery of the UK economy is relatively strong and the UK is expected to be the second advanced nation to raise the interest rate. The next mark for bulls is 1.56, but traders should keep caution as selling pressure above is still heavy.
More articles have been published, warning an immediate-term retracement of the US Dollar. The rise of majors led by the GBP and commodity currencies has added to the supporting evidence. The long-term bullish trend USD is unchanged, but when all players are betting on one side of the table and some starts to move toward another side, the game will change quickly.
Turning to the stock markets, the China markets ended its 7 winning streak yesterday by dropping 0.56% in its first trading day after the holiday. The Nikkei Stock Average gained 0.1% to 18585. The Australia 200 rebounded by 0.3% to 5945. In European markets, the UK FTSE was down 0.21%, the German DAX climbed 0.1% and the French CAC Index lost 0.1%. The US stock indices remained mostly unchanged. The S&P 500 closed 0.1% lower at 2114. The Dow gained 0.1% to 18225, and the Nasdaq Composite Index closed at 4967.
On the data front, Australian Private Capital Expenditure will be released at 11:30 AEDST. UK Second Estimate GDP will be at 20:30 AEDST. US and Canada CPI data will be out at 0:30 AEDST with US weekly unemployment claims.