Aussie is on the back foot upon Aussie CAPEX smashes as well as virus concerns weighing on the quote. Australia’s second-quarter CAPEX survey has been released and beats expectations by a mile. Australia Q2 New Capital Expenditure +4.4 pct QoQ s/adj (Reuters poll +2.5 pct). Australia Q2 Building CAPEX +4.6 pct QoQ, s/adj. Australia Q2 Plant/Machinery CAPEX +4.3 pct QoQ s/adj. The focus ahead of Gross Domestic Product, however, is the equipment investment sub-component, which too was a strong number. Aussie is not impressed and remains subdued and it is on the down today.

Meanwhile, domestically despite the fact that the New South Wales government will today or tomorrow fully relax some restrictions on those vaccinated, reaching the 6 million vaccination target a week earlier, Westpac analysts said on today. Victoria, Australia’s 2nd most populous state will face new lawsuits because of sudden increase in the Covid cases, almost doubling the number of the previous day, from 80 vs. 45. Lock down in the state is severe as there is a curfew order in Melbourne. This is negative for Aussies considering how far the country has come in vaccine release. ‘The ABS will also release the latest fortnightly read for payrolls and wages, as of 31 July, which captures wide-ranging lockdowns.

On the other hand, the Countdown to the Federal Reserve chair will deliver a keynote address on Friday and markets are in high anticipation. If the US dollar expects this speech and is not immediate depending on the outcome, there may be a decisive bias in price determination in the coming days. The current status quo will work if Powell sticks to the same script we heard again and again in recent weeks on the latest Federal Reserve decision and its minutes. In such a scenario, the risk-on would reveal the movement of the US dollar into commodity currencies and EM-FX.

The Fed has done a very good job under their guidance, figuring out how they want to tape first and what conditions are required to do so, and then eventually move on to raising rates. With all this being said, the US dollar has fallen late and is slipping from the most critical levels on the long-term chart to the lowest level since the chances of a Taper announcement or an immediate start to the day were dialed in at the end of the year. Therefore, if Powell wants to resurrect the expectation that the start date will come soon, he may sit on the dry powder side of the US dollar and send it back for higher hikes.

Risk markets are trading positively as the Jackson hole opens this Thursday and concerns about future global growth outlook continue to ease. Delay variation is fluid and lives a dangerous life when the US and China come out with a cleaner slate than some other less influential countries. All of this boosted the US Treasury yield almost two weeks before Powell’s speech. That local data aside, markets are looking in the direction of the US calendar today.

AUD/USD 4 Hour Chart:

Support: 0.7248 (S1), 0.7221 (S2), 0.7204 (S3).

Resistance: 0.7291 (R1), 0.7307 (R2), 0.7334 (R3).

Amidst this above catalysts Aussie pair is on sluggish moment upon CAPEX quarterly report and also US market looking ahead of Jerome Powell speech. We expect a bearish trend for AUD/USD.