The US dollar was sold after day one of Fed Chairwoman Janet Yellen's testimony to the Senate Banking Committee. While Yellen remained optimistic about the U.S. economy, her ruling out of a rate hike over the next couple meetings helped drive down the dollar.
So far Yellen has been successful in not telling us anything new. Expectations still remain for the rate hike cycle to begin either in June or September and that is why buying the dollar on any major dip is welcomed.
Price action on the AUD/USD daily chart shows the slight rebound that occurred yesterday. Key resistance will come from the 50-day SMA which is trading around the .7950 region.
In the event we see a major rebound with commodities or sharp drop with US yields, critical resistance will come from the psychological .80 handle. A weekly close above that noted level could open the door for a wide consolidating period.
Longer-term downward targets include the .7500 handle.
The trade: Sell AUD/USD at .7950, with a stop loss at .8050 and take profit at .7750. The risk/reward ratio is 1:2.
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading