USD Trading Outlook (25-08-2014)

AUD/USD shook off a new high for the move in the broader USD, holding a test of key support at .9290. Fed chair Yellen’s speech offered little new news, but expectations were so high for a dovish slant that the net result ended up giving the dollar bulls another reason to press on. However, the US rate market is still willing to underprice the Fed’s central tendency, not believing that rate hikes will match the rhetoric. Jackson Hole didn’t change this view and this stance serves to keep the ‘carry trade’ intact. With the S&P within close reach of record highs the markets are displaying no fear of the Fed, all of which creates a positive backdrop for AUD. A breakout above 96.50 in AUDJPY led the way for the Oz (chart below) and gives bulls a reason to establish a foothold in other pairs. AUDUSD resistance is at the high of the week (.9345) and the 40 dma at .9356.