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AUD rally pauses ahead of Jackson Hole

Australian dollar drifting

After plenty of volatility over the past week, the Australian dollar has settled down on Wednesday. AUD/USD is currently trading at 0.7251, down 0.09% on the day. The Aussie has sparkled this week, with gains of 1.5%. This follows a fall of 3% a weak earlier.

With markets in a wait-and-see mode ahead of the Jackson Hole meeting, which begins on Thursday, the currency markets could be on hold for the next day or two. The lack of activity is likely to change on Friday, when Fed Chair Jerome Powell addresses the symposium. The million-dollar question on the minds of the markets is whether Powell will provide any insight into the timing of a Fed taper. Risk sentiment has improved with the Biden Administration making progress on its budget and infrastructure proposals, but the mood could quickly shift, depending on what Powell says – if he hints that a taper is imminent, that would likely give the dollar a boost. If, however, Powell chooses to lay low and doesn’t say much about a taper, risk sentiment could improve and weigh on the greenback.

The Australian dollar has enjoyed a strong week, despite soft manufacturing and services PMIs and lockdowns which have been imposed on half of the population of 25 million. The country had done a remarkable job in containing Covid, but the delta variant has sent infections soaring, while the vaccination rate remains low. If the lockdowns are extended, there are concerns that the weak Australian economy could totter into a recession.

In economic news, the construction sector continued to expand in Q2, with a gain of 0.8%, down from 2.4% (est. 2.5%). Still, the sector is in recovery mode, posting its second straight gain after a nasty steak of contraction in 10 straight quarters.

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AUD/USD Technical

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Kenny Fisher

Kenny Fisher [6]

Market Analyst at OANDA [7]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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