The Australian and New Zealand dollars are running away with the idea of a longer potential Fed pause, just hours before the latest decision. NZD/USD is up 1.0% and AUD/USD up 0.75% as the pairs rally following softer US producer prices.
There may be also something of a pivot towards Asian-levered assets with China lowering rates this week and poised to do more on Thursday (and again next week). That could help explain why CAD is trailing its commodity counterparts even with oil up 1.1% today.
Technically, AUD/USD is in an interesting place here as it edges above the May high of 0.6818.
The drop to 0.6500 is looking like a fake breakdown and those can be followed by powerful reversals. If Powell sounds sufficiently dovish today and the PBOC follows through with cuts, there's plenty of fuel for a run to the 2023 high of 0.7150.
