Dollar bulls seem to find themselves in great comfort ahead of the Powell speech at an economic conference in Washington. The DXY index presses against 104 level and is generally at the highs of this year. The breakout of the main channel looks quite daunting for dollar shorts:

The NFP report contrasted sharply with the Fed's moderate stance and Powell's tone at last Wednesday's press conference, so the market expects the central banker to take advantage of the opportunity given to him and make verbal interventions today. Judging by the consistent reaction in the three asset classes - the dollar, US stocks and Treasury bonds, the market bets on a hawkish "mini-reversal" in rhetoric. It follows that if the content of Powell's speech differs little from what he said at the FOMC press conference, the dollar will most likely lose some or even all the gains made since the NFP release, stocks will return to an upward trajectory, and bonds will be bid again. The crypto market will most likely bounce up.

The EUR/USD pair is declining today and left 1.07 behind. There are not many factors contributing to the fall of the euro from the European economy or the ECB, so I would still consider the downtrend as a pullback from the “round” mark of 1.10. ECB officials are keen to restore market confidence after Lagarde failed to convince markets of the ECB's tough stance, leading to a sell-off in European bonds after the ECB meeting. There are four ECB speakers scheduled to speak today - three hawks and one dove - so Powell may not be the only one with surprises today. 

The Reserve Bank of Australia raised rates by 25 basis points in line with consensus and signaled that further rate hikes are on the way. Steady inflation has made the RBA sound more hawkish and raise its tightening outlook. 

Markets now estimate the peak rate at 3.9%, which is higher than the 3.6% that prevailed before the meeting; however, this target is likely to be revised upwards. The terminal RBA rate is likely to be at the level of 4%+ and the central bank will move to softening not earlier than in 4Q23.

The AUD remains an attractive choice in the G10 space due to the hawkish RBA stance, recovery of the Chinese economy and a generally good start of the commodities market this year. Potential of further hawkish revision of RBA rate expectations mean that the 0.75 AUD/USD level could be reached as early as Q2 2023, with an interim target of 0.72 in March: