The Australian dollar has risen more than 1% against the dollar from this month's lows, and if Powell's view is correct that the recent inflation data, although higher than expected, has not "materially changed" the overall situation, then the Australian dollar could come under more pressure against the dollar. The yield spread between Australia and the US 10-year has narrowed to 19 basis points. If it falls below 18 basis points, the spot pair may break through the March 08 peak of 0.6668. If the non-farm payrolls data proves Powell's view right, then more of a scenario will be that the market is getting closer to the Fed than the Fed is in line with market expectations, and the Aussie will rise as a result. Asset managers who are still short the AUD are certainly feeling nervous as AUD/USD tests trendline resistance.
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If Powell is right, AUD bears could come under more pressure
The Australian dollar has risen more than 1% against the dollar from this month's lows, and if Powell's view is correct that the recent inflation data, although higher than expected, has not "materially changed" the overall situation, then the Australian dollar could come under more pressure against the dollar. The yield spread between Australia and the US 10-year has narrowed to 19 basis points. If it falls below 18 basis points, the spot pair may break through the March 08 peak of 0.6668. If the non-farm payrolls data proves Powell's view right, then more of a scenario will be that the market is getting closer to the Fed than the Fed is in line with market expectations, and the Aussie will rise as a result. Asset managers who are still short the AUD are certainly feeling nervous as AUD/USD tests trendline resistance.