AUD/USD slides to two-week low, eyes mid-0.6800s ahead of Fed Chair Powell
|- AUD/USD lost ground for the third successive day and dropped to a two-week low on Wednesday.
- Recession fears weighed on investors’ sentiment and drove flows away from the risk-sensitive aussie.
- Sliding US bond yields capped the USD and might help limit losses ahead of Fed Chair Powell’s speech.
The AUD/USD pair witnessed some selling for the third successive day on Wednesday and dropped to a two-week low, around the 0.6865 region during the early part of the European session.
The worsening global economic outlook continued weighing on investors' sentiment, which was evident from the prevalent cautious mood around the equity markets. This overshadowed upbeat Australian Retail Sales data and continued acting as a headwind for the risk-sensitive aussie.
On the other hand, the US dollar drew some support from the overnight hawkish remarks by New York Fed President John Williams and San Francisco’s Mary Daly, which lifted bets for aggressive Fed rate hikes. This was seen as another factor that exerted pressure on the AUD/USD pair lower.
Market participants, however, remain divided about the prospects for a faster policy tightening by the Fed amid growing recession fears. This, along with a fresh leg down in the US Treasury bond yields, capped the USD and might help limit deeper losses for the AUD/USD pair.
Traders also seemed reluctant to place aggressive bets and preferred to wait for Fed Chair Jerome Powell's speech at the ECB forum in Sintra. Powell's comments would be scrutinized for clues about the Fed's policy outlook, which would provide a fresh impetus to the AUD/USD pair.
Nevertheless, the fundamental backdrop seems tilted in favour of bearish traders and supports prospects for a further near-term depreciating move for the AUD/USD pair. Hence, some follow-through slide to mid-0.6800s, en-route the YTD low touched in May, remains a distinct possibility.
Technical levels to watch
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