Drops Sharply

After challenging 0.7820 twice during the European session AUD/USD cratered as the greenback went bid following a speech from Fed Governor Powell that led participants to believe the Fed would not push back against the recent rise in yields. AUD/USD hit lows of 0.7713, the pair last at 0.7715 coming under some extra pressure in early Asia.

• Data earlier showed the AiG performance of services index rose to 55.8 in February, the highest since September 2018, from 54.3 previously. Ai Group Chief Executive, Innes Willox, said: "The Australian services sector rebounded further from the 2020 recession in February with strong growth in sales driving expansion in the logistics, retail trade & hospitality, health & education and personal, recreation & other services sectors. In contrast, the business & property services sector slipped into contraction with weaknesses in the business-to-business segments of the sector. While the continued improvement in conditions is heartening, employment fell in February following a strong recovery in the preceding months."
• From a technical perspective despite this week's recovery, AUD/USD remains vulnerable following last week's sharp sell-off from 0.8007, Feb 25 high. Price action has so far managed to find support at the 50-day EMA that intersects at 0.7704. A clear break of the average would signal scope for a deeper pullback and open 0.7600 and potentially below. Initial resistance is at 0.7883, Feb 26 high with the bull trigger for a resumption of gains at 0.8007
• Markets look ahead to foreign reserves data at 0530GMT/1630AEDT, participants will watch the "Two Session" in China for signs of any comments that could affect Australian exports.