Australian dollar range bound as volatility flattens out

Daily Currency Update

AUD - Australian DollarThe Australian dollar drifted between well-defined ranges through trade on Wednesday, bouncing between 0.7720 and 0.7755. Moves within currency markets were largely muted as a lack of headline data points and limited news flows offered little to shift current market biases. US inflation data edged lower, down 0.2% in January, easing concerns inflation will gather pace as the economic recovery builds. While the softer than anticipated figures forced bond yields lower, the impact on the USD was largely muted, providing little scope for the AUD to extend beyond resistance at 0.7740/50. Having edged toward the lower end of recent ranges on open the AUD currently buys 0.7720 US cents. Our attentions turn now to commentary from Fed Chair Jerome Powell. We expect Powell will simply affirm the recent narrative but any insight into the Fed’s expectations for inflation and its impact on planned policy could provide an impetus for a shift in direction. We are watching for a break above 0.7750 to signal a further extension back toward 0.78 with a dip below 0.7720 and 0.7680 signalling a return to near term bearish bias.