AUD/USD Forex Technical Analysis – Powell Speech, Lower Growth Forecasts Keep Prices in Check

The Australian Dollar is trading rangebound for a third session on Tuesday as investors await a key speech from Federal Reserve Chairman Jerome Powell at the Jackson Hole, Wyoming central bankers’ symposium.

Perhaps keeping a lid on prices is the sharp rise in U.S. Treasury yields on Tuesday. Better-than-expected U.S. economic data could also be pressuring the Aussie into a holding pattern. In other potentially bearish news, the National Australia Bank (NAB) slashed the GDP forecasts in reaction to the lockdown in Victoria.

At 16:04 GMT, the AUD/USD is trading .7174, up 0.0012 or +0.17%.

Providing some support is the news that top trade representatives from Washington and Beijing had a call to discuss the implementation of their phase one trade agreement. Australia is China’s biggest trading partner. Increased demand for risky assets could also be underpinning prices after Monday’s news that the U.S. Food and Drug Administration (FDA) approved the use of convalescent plasma as a treatment for coronavirus patients, though scientists and public health officials have raised doubts over its effectiveness.

Powell Speech to Center on How the Fed Views Inflation

Federal Reserve Chairman Jerome Powell will speak Thursday during a virtual version of the Fed’s annual Jackson Hole, Wyoming conference. He is expected to outline what could be the central bank’s most active efforts ever to spur inflation back to a healthy level. The Fed is expected to use a tool known as “average inflation”.

“Average inflation” targeting means the Fed will allow inflation to run higher than normal for a period of time.

Powell’s speech could include a vow as well to keep policy as accommodative as possible until inflation and employment are both stabilized.

Growth Forecasts Slashed for Australian Economy

Growth forecasts for the Australian economy have been slashed by economists at NAB as they account for the economic impact of the lockdown in the state of Victoria, which is expected to knock 3% off the country’s overall GDP.

“The lockdown in the state of Victoria in response to a second spike of the COVID-19 virus has blunted Australia’s economic recovery from an initial lockdown in March and April, and will therefore ultimately delay the speed at which the Reserve Bank of Australia can normalize its policy settings by raising interest rates and ending quantitative easing.”

“The move in early August to state 4 restrictions Melbourne, and stage 3 for the rest of the State, and fears of further spread, has led to a significant downgrading of our economic outlook,: says Tony Kelly, Senior Economist at NAB. “The restrictions in Victoria could well reduce Victorian output by around 15% in Q3. Nationally that would take around 3 percent off Q3 GDP.”

For a look at all of today’s economic events, check out our economic calendar.