Federal Reserve chair Jerome Powell's testimony before a US House committee Tuesday sparked a dollar rally that weighed heavily on both stocks on commodities. In Saxo Bank head of forex strategy John Hardy's view, it was Powell's demeanour – his "more transparent style" – that marked the biggest shift away from the Bernanke/Yellen era, with markets picking up on the change and boosting USD.
"We see a variety of USD pairs at their 200-day moving averages with USDCAD having broken through the line and AUDUSD now testing it," says Hardy.
Concerning the Aussie, Hardy reports that a meltdown through 0.7750 would mark a definitive end to the AUD's rally.
On the yen, Hardy notes that the currency surged versus most major rivals, likely on the traditional risk-off bid, but USDJPY remains rangebound given the dollar's bullish tone.
In stocks, Saxo Bank head of equity strategy Peter Garnry reports that capital-intensive sectors like real estate, consumer discretionary, utilities, and telecoms were hardest hit Tuesday given the dollar's rally.
Beyond Powell, the USD bid was lent extra force by the release of a US consumer confidence print showing the highest reading since late 2000.
Garnry reiterates his overweight stance on semiconductors, technology hardware, software, and consumer shares while maintaining and underweight stance on energy, utilities, telecoms, media, and real estate.
Looking back to the Powell address, Garnry says that four rate hikes are now determinedly on the table for 2018.
Saxo's Morning Call is published immediately post- the European open every weekday.