Federal Reserve Chairman Powell’s long-anticipated speech on last week Friday at Jackson Hole provided fireworks but not quite what the market had expected. The dollar is at a several-week low today after Federal Reserve Chairman Jerome Powell said the storm that hit the oil fields in the Gulf of Mexico was slower than expected. The greenback fell broadly on Friday, with Powell managed to flag an exit from emergency monetary policy settings that did not spook markets or suggest a rush to raise interest rates. “It is appropriate to start slowing down the pace of property purchases this year,” Powell said in a speech, the determining factor in employment. But it does not directly signal higher rates because the hiking economy will have to go through a “different and substantially more severe test”.

“Powell was vague on the timing of tapering, and his reiteration that it is separate from a decision to raise rates was read to imply that there’d be a gap,” ANZ analysts said in a note. Together with COVID moments in the market and  Friday’s U.S. non-farm payrolls will make or break the case for announcing tapering at the (Fed’s) September meeting,” said Commonwealth Bank of Australia analyst Kim Mundy. “We consider another 800,000 jobs should be enough to announce tapering. We expect the dollar to regain some lost ground this week while market participants are still worried COVID will slow the world economy.” as per Reuters report.

On the other hand Australian Bureau of Statistics released its “business indicators” report for the June quarter on today. Australia Company Gross Operating Profits q/q measures a change in the total profits of private companies in the reported quarter compared to the previous one. The June month key points are “The seasonally adjusted estimate for: Inventories rose 0.2% in the June quarter 2021. But manufacturing sales of goods and services fell 0.2% this quarter. Wholesale trade sales of goods and services rose 0.2%.” And the Current price estimates are Company gross operating profits rose 7.1% forecast is 4.7% previous -0.6% and the Wages and salaries rose 2.0%. This report favors the Aussie today.

Same time Australia economy suffering with Victorian Premier Daniel Andrews flagging the state’s sixth lockdown will extend beyond Thursday as virus infections hit 92. There is also no end in sight for the NSW shutdown after the state hit a record 1218 virus cases on Sunday, and a further six deaths. Economists were already predicting the economy could contract by as much as four per cent in the September quarter as a result of the lockdowns in NSW and Victoria, the nation’s two most populous states. Still, the virus and lockdowns are sapping the strength of the Australian economy, and this will be evident in next week’s data, which includes July trade figures and the final August PMI.  Growth in the second quarter is expected to have slowed from an impressive 1.8% to around 0.5%, but the economy has slowed since, and the PMI warns of the risk of a contraction in Q3.

The focus is now on US labor data, which is the next clue to the tapping time of asset purchases and efforts to curb the spread of Covid-19 on Friday.

AUD/USD 4 Hour Chart:

Support: 0.7251 (S1), 0.7189 (S2), 0.7156 (S3).

Resistance: 0.7345 (R1), 0.7378 (R2), 0.7440 (R3).

Amidst this above catalysts the greenback soften trend and Aussie Business indicators report favoring Aussie. We expect a bullish trend for AUD/USD.