US bearish trend continues despite Fed Chair's hawkish outlook

AUD / USD

Expected Range: 0..6980 - 0.7180

The Australian dollar edged upward through trade on Wednesday amid a deepening bearish trend clouding the U.S dollar. With little fundamental data on hand to drive direction the AUD was again at the mercy of global risk appetite flows and a market lacking liquidity while Chinese New Year celebrations continue. The Aussie edged through 0.71 but struggled to break above technical resistance at 0.7130 touching intraday highs at 0.7125. Despite a surprisingly upbeat commentary on Monetary Policy from Fed Chair Janet Yellen, wherein she reiterated her belief the FOMC would not be forced to move away from its current path of gradual tightening, the Aussie held onto gains throughout the back end of the North American session. Yellen, despite standing by the Fed’s current policy platform, failed to deliver a definitive timeline and thus assuage market fears interest rates will remain on hold through much if not all of 2016. Attentions today turn to the Fed Presidents second Congressional address with a hope a conclusive guideline is proffered.

NZD / USD

Expected Range: 0.6550 - 0.6750

The New Zealand dollar edged higher through trade on Wednesday benefitting from an overwhelming downturn in USD fortunes. With little fundamental data of note available to drive direction the Kiwi took advantage of continued USD weakness rallying back through 0.66 and advancing almost 100 points to touch intraday highs at 0.6690. Even Janet Yellen’s somewhat hawkish congressional testimony wasn’t enough to force a significant Kiwi sell off as the Fed President failed to convince investors additional monetary policy tightening would commence throughout the year ahead. Attentions now turn to day two of Yellen’s semi-annual monetary policy address for further guidance surrounding the Fed and FOMC’s current outlook.

GBP / AUD

Expected Range: 2.0250 - 2.0550

The Great British pound crept marginally higher through trade on Wednesday despite a larger than anticipated decline in manufacturing production. Having touched intraday highs at 1.4577 Sterling quickly pared gains tumbling 130 points in response to the softer than expected print before supports at 1.4450 kicked in ahead of FOMC and Fed chair Janet Yellen’s Congressional testimony. While adopting a somewhat hawkish tone that reiterated the Fed’s current policy of gradual tightening the Fed President failed to give any firm indication of when the next round of tightening would commence. Sterling partially recovered earlier losses edging through 1.45 and opens this morning buying 1.4519 U.S. Attentions today turn to the U.S as Yellen moves into day two of her monetary policy declaration.

USD, EUR, JPY

The U.S dollar continued in its struggle to break a bear cycle that has seen the world’s base currency touch near 4 month lows amid speculation a global economic slowdown will waylay future Federal Reserve interest rate increases. The U.S dollar index has given up over 3% since the start of the month as investors’ expectations drift away from Fed guidance. The Japanese Yen hit a 15 month high through trade on Wednesday touching 113.71 marking a 6% advance throughout February thus far and highlighting the current demand for haven assets. Tumbling commodity prices, stagnant global growth and instability across European banks have pushed investors to sell down risk correlated assets buying back into the Yen, CHF and Euro. Federal Reserve Chair Janet Yellen offered some respite to Greenback bulls adopting a surprisingly upbeat and hawkish tone in her Semi-annual address to Congress on Monetary Policy. Yellen suggested there was no reason for the FOMC to reverse its current policy of gradual tightening, confident the outlook for the US economy remained strong. The Fed President highlighted continued labour market and wage growth as drivers for consumer spending and an improvement in the longer-term inflation outlook. The comments helped reverse the downtrend and the U.S dollar edged higher against a basket of currency. Attentions today turn to day two of Yellen’s congressional address and unemployment claims as the key fundamental drivers governing direction.