AUD/USD rallied 21DMA and probing 0.7200 level as buck suffers post-Powell testimony

• AUD/USD is at session highs above its 21DMA and probing the 0.7200 area as the dollar weakens post-Powell comments.
• Powell’s remarks did not surprise market participants and the dollar seems to be suffering amid profit-taking.

AUD/USD has seen upside in recent trade and recently hit session highs a whisker below the 0.7200 level as the dollar suffers broad weakness in wake of remarks from Fed chair Jerome Powell. Powell’s remarks, made at his renomination hearing before the Senate Banking Committee, were broadly in line with the hawkish tone of the Fed minutes released last week, with Powell referencing plans to lift rates and begin balance sheet reduction in 2022. The lack of surprises seems to have triggered relief in US equities, with tech and rate-sensitive growth stocks the best performers, as well as triggering some profit taking on long dollar positions. Indeed, the market is heavily long USD versus most G10 currencies, including the Aussie - last week’s CFTC data (released every week) showed that speculator’s net short position in AUD/USD was close to a 52-week high.

Returning back to AUD/USD price action; the pair now trades higher on the day by about 0.4%, making it one of the better performing G10 currencies alongside with some its risk-sensitive peers including NZD and CAD. Strength in copper (+1.1%), gold (+0.7%), oil (+3.3%) and other commodity prices on Tuesday is helping AUD and its other commodity-sensitive peers, whilst the Aussie is also getting an independent boost from Tuesday’s strong retail sales report. The presence of the 21-day moving average in the 0.7190s is currently offering resistance, as has been the case over the past three sessions and a break above this area plus the 0.7200 mark could open the door to a prolonged move back towards recent highs in the 0.7275 area. Should the dollar continue to fail to benefit from hawkish Fed vibes and strong/hawkish US data this week, that could provoke further profit-taking and exacerbate recent upside.