• Fed Chair Powell's semiannual testimony provided little really new information versus last week's communications. The recent rise in the unemployment rate has not met the FOMC's cutting "test" of unexpected weakness in the labour market and this may have provided a moderate boost to the greenback on Tuesday. As such, the USD index is up 0.15% approaching the close, however, G10 ranges overall have remained subdued.
  • Price action did allow USDJPY to edge higher and is the best performing major pair. USDJPY briefly rose above 161.40 - the Friday high and further progress through here will confirm the pullback off the multi-decade high as corrective in nature, and bring new cycle highs and Japanese intervention back into question.
  • JPY selling in the crosses helped to add to the move, with EUR/JPY falling just shy of fresh multi decade highs, adding extra pressure to the JPY trade-weighted index.
  • AUD net positioning continued to rise in the latest CFTC report, reducing the AUD net short to 8% of open interest, the smallest net short in a year. Indeed, AUDUSD bullish conditions remain intact following the recent break of key short-term resistance at 0.6714, the May 16 high. This highlights a significant range breakout and confirms a resumption of the bull leg that started Apr 19. A continuation higher would open 0.6771 next, the Jan 3 high and 0.6839, the Jan 02 high.
  • Given the proximity to tomorrow’s RBNZ meeting, AUDNZD will be in focus, a cross that has garnered more attention in recent sessions as we rise back above 1.10 once again. We note the move has been assisted by rate differentials, with the AU-NZ 2yr swap spread now 46bps above the May lows at -48bps. This represents the highest levels since August 2022.
  • Having struggled to maintain momentum above this 1.10 mark over the past 12 months, closes above 1.1031 and 1.1056 will be crucial for the cross going forward. A break above 1.1088 would place the cross at the highest level since October 2022.

FOREX: Greenback Edges Higher Post Powell, Focus on CPI Thursday

Last updated at:Jul-09 18:49By: Jack Lewis
  • Fed Chair Powell's semiannual testimony provided little really new information versus last week's communications. The recent rise in the unemployment rate has not met the FOMC's cutting "test" of unexpected weakness in the labour market and this may have provided a moderate boost to the greenback on Tuesday. As such, the USD index is up 0.15% approaching the close, however, G10 ranges overall have remained subdued.
  • Price action did allow USDJPY to edge higher and is the best performing major pair. USDJPY briefly rose above 161.40 - the Friday high and further progress through here will confirm the pullback off the multi-decade high as corrective in nature, and bring new cycle highs and Japanese intervention back into question.
  • JPY selling in the crosses helped to add to the move, with EUR/JPY falling just shy of fresh multi decade highs, adding extra pressure to the JPY trade-weighted index.
  • AUD net positioning continued to rise in the latest CFTC report, reducing the AUD net short to 8% of open interest, the smallest net short in a year. Indeed, AUDUSD bullish conditions remain intact following the recent break of key short-term resistance at 0.6714, the May 16 high. This highlights a significant range breakout and confirms a resumption of the bull leg that started Apr 19. A continuation higher would open 0.6771 next, the Jan 3 high and 0.6839, the Jan 02 high.
  • Given the proximity to tomorrow’s RBNZ meeting, AUDNZD will be in focus, a cross that has garnered more attention in recent sessions as we rise back above 1.10 once again. We note the move has been assisted by rate differentials, with the AU-NZ 2yr swap spread now 46bps above the May lows at -48bps. This represents the highest levels since August 2022.
  • Having struggled to maintain momentum above this 1.10 mark over the past 12 months, closes above 1.1031 and 1.1056 will be crucial for the cross going forward. A break above 1.1088 would place the cross at the highest level since October 2022.

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