The US dollar has been in a consolidation phase since the start of the week. Bulls are trying really hard to hold the price above 104 despite the lack of drivers. They managed to defend this level in the Asian session. The US dollar index recovered to 104.2 versus its main rivals.

It has been growing for the second session in a row. On Wednesday morning, the greenback was moving in the upward range of 104.0–104.3. US government bonds advanced as well.

A possible pause in the tightening cycle means a period of stable interest rates. At the same time, Treasury note yields halted their decline as the debt ceiling deal pushed the US government to issue more bonds.

As investors are anticipating the Fed’s rate decision, the 105 level remains a key resistance level for further growth. The support level is located at a monthly low of 103.3.

Expectations of a pause and the lack of crucial macro stats from the US had a positive effect on the yen. It also climbed amid the BoJ governor’s hawkish comments and the weakness of the greenback.

The dollar/yen pair started the Asian session with a drop in the price corridor of 139.1–139.7. Its monthly support level of 139.7 turned into resistance. At the end of the Asian session, the bears pushed the pair to 139.4.

Kazuo Ueda stressed once again that the regulator would stick to its ultra-loose stance until the inflation reaches the target level. At the same time, some of his comments were deemed hawkish by investors.

"When achievement of our price target is foreseen, we will debate specifics (of an exit policy) at our policy meeting," Ueda said. He also pointed out the regulator would take into account the economic and inflation news before making any decisions.

While the plans of the BoJ are still unclear, the Reserve Bank of Australia maintains a hawkish stance. Philip Lowe admits that the path to achieving a soft landing remains narrow.

At a press conference on Wednesday, he warned that there are "significant risks" to the economy and there are signs of an economic slowdown. Due to stubbornly high inflation and aggressive tightening, the Australian economy has contracted markedly and expanded by only 0.2% in the first quarter of 2023.

Speculators also anticipated fresh macro stats from China with bated breath. China’s trade surplus totaled $65.8 billion. Imports climbed by 2.3%. However, the figure remains in the negative area at the level of -4.5%.

Due to a decline in Australia’s GDP and relatively positive news from China, the Australian dollar was very volatile. In the morning, it managed to reach the 3-week high of 0.6690.

However, following the release of China’s economic reports and the fall of the yuan, the aussie lost its bullish momentum and tested the intraday low of 0.6666. At the end of the Asian session, the aussie recovered to 0.6688. Given that it is extremely vulnerable to Wall Street sentiment, bears could regain control.
For instance, the kiwi resumed the downward movement. It was moving in the downward range of 0.6058–0.6091. Although the kiwi managed to advance to 0.6076, it did not change the overall bearish outlook.

00:00 Intro
00:22 CME FEDWATCH TOOL
00:58 USDX
02:09 USD/JPY
02:49 Kazuo Ueda
03:27 Philip Lowe
03:53 AUSTRALIA’S GDP
04:08 CHINA’S IMPORTS
04:30 AUD/USD
05:11 NZD/USD

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