• AUD/USD is finding solace in firmer stocks and in the weakness of the US dollar and prospects of lower levels in DXY to come.
  • Analysts eye 102 for DXY near term, and this leaves AUD in limbo. 

At 0.6896, AUD/USD is down some 0.4% on the day although the US dollar remains under pressure on Thursday as it looked set to extend declines against major peers to a fourth day. Nevertheless, the Aussie struggles across the board and vs the greenback, it has fallen from a high of 0.6927 to a low of 0.6869 so far as the Wall Street close approaches. 

The greenback has been dented by Treasury yields wallowing near two-week lows amid rising concerns of a recession following two days of testimony from the Federal Reserves Chairman, Jerome Powell

Powell said in testimony to Congress on Wednesday that the central bank is fully committed to bringing prices under control even if doing so risks an economic downturn. He said a recession was "certainly a possibility," reflecting fears in financial markets that the Fed's tightening pace will throttle growth.

On his second day of testifying before Congress, Powell said the Fed's commitment to reining in 40-year-high inflation is "unconditional" but also comes with the risk of higher unemployment. However, there has been less of an impact on Thursday from his comments as the narrative moved over from inflation and towards the rising likelihood of a recession following alarmingly poor US data.

Markit’s flash composite PMI cooled from 53.6 in May to a 5-month low of 51.2 in June. While still above the 50-point mark separating expansion from contraction, this result was the second weakest since July 2020, when the economy was emerging from a pandemic-induced lockdown. The manufacturing sector tracker fell from 57.0 to a 23-month low of 52.4, marking one of the largest monthly declines in data going back to 2007. The services sub-index, for its part, decreased from 53.4 to a 5-month low of 51.6.

After falling 8.6% in February, 3.0% in March and 2.6% in April, existing-home sales dropped another 3.4% in the US in May to 5,410K (seasonally adjusted and annualized), bringing the total drawback over four months to 16.6%. This was also the lowest level of sales observed in nearly two years.

Nevertheless, Wall Street's main indexes were mixed in choppy trading on Thursday and the benchmark S&P 500 is headed for a positive close as gains in defensive shares countered declines for economically sensitive groups amid growing worries about a recession. Benchmark U.S. Treasury yields fell to two-week lows, supporting tech and other growth stocks and keeping the Nasdaq in positive territory.

However, trading is set to remain volatile in the wake of the S&P 500 last week logging its biggest weekly percentage drop since March 2020. Investors are weighing how far stocks could fall after the index earlier this month fell over 20% from its January all-time high, confirming the common definition of a bear market, which is not going to be favourable for the high better currencies such as the Aussie.

US dollar bulls throwing in their towels

In the meantime, it can take refuge in the softness of the greenback and the prospects of lower levels to follow, as per the following technical analysis:

The dollar index (DXY), which measures the currency against six key rivals, slipped 0.14% to 104.06 in recent trade which is leaving an hourly H&S on the chart, taking it towards a test of the neckline at the time of writing:

A break of structure, BoS, will open risk to run on the price imbalances, PI, below and that will leave 103.13 (a mid-point of an important bullish order block, OB) and below exposed.

The DXY is already down to a decline since Friday to 0.5%. It has fallen 1.57% from the two-decade peak of 105.79 reached on June 15, when the Federal Reserve raised rates by 75 basis points, which was the biggest hike since 1994.

This is due to the concerns that the Fed's commitment to quelling red-hot inflation will spur a recession that has sent the 10-year Treasury yields sliding to an almost two-week low.

"Powell's semi-annual testimony has taken some steam out of the USD, his comments regarding elevated recession risk evidently weighing more than his unconditional commitment to restore price stability," Westpac analysts recently said.

"But with 75bp still on the table for July and Fed Funds set to rise above 3% by year’s end, USD interest rate support should ultimately continue to build."

The analysts at Westpac have observed the risks and forecast that the DXY will drop to as far as the 102 level in the near term.

As for the Aussie, analysts at Rabobank said, ''we expect AUD/USD to hold close to current levels on a 1-month view and rise moderately to the 0.73 area by year-end. ''

''The AUD is likely to be sensitive to risks regarding Chinese economic output and broader concerns regarding slowing global growth.''


Today last price 0.6903
Today Daily Change -0.0024
Today Daily Change % -0.35
Today daily open 0.6927
Daily SMA20 0.7084
Daily SMA50 0.7109
Daily SMA100 0.7216
Daily SMA200 0.7236
Previous Daily High 0.6975
Previous Daily Low 0.6881
Previous Weekly High 0.707
Previous Weekly Low 0.685
Previous Monthly High 0.7267
Previous Monthly Low 0.6828
Daily Fibonacci 38.2% 0.6917
Daily Fibonacci 61.8% 0.6939
Daily Pivot Point S1 0.688
Daily Pivot Point S2 0.6833
Daily Pivot Point S3 0.6785
Daily Pivot Point R1 0.6974
Daily Pivot Point R2 0.7022
Daily Pivot Point R3 0.7069



Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended content

Recommended content

Editors’ Picks

AUD/USD struggles around 0.7000 amid weaker USD, Australian Wage data miss

AUD/USD struggles around 0.7000 amid weaker USD, Australian Wage data miss

AUD/USD is trading close to 0.7000, consolidating the dismal Australian wage price data-led losses. Softening wage growth data could prompt the RBA to slow down its policy tightening. The US dollar looks to extend the previous sell-off ahead of the FOMC minutes.


EUR/USD: 1.0100 remains in sight below 21 DMA, EU GDP, Fed minutes awaited

EUR/USD: 1.0100 remains in sight below 21 DMA, EU GDP, Fed minutes awaited

EUR/USD consolidates the previous rebound amid a cautiously optimistic mood. US dollar takes a breather ahead of Fed minutes, the euro awaits Eurozone GDP. The shared currency remains weighed down by recession fears and gas crises.


Gold bears are lurking below $1,785

Gold bears are lurking below $1,785

Gold is flat on the day trading at around $1,776.50 and sticking to a tight range of between $1,773.91 to a high of $1,776.85. The yellow metal fell due to rising Treasury yields weighed on investor appetite. A slightly stronger US dollar was also a headwind for investor demand. 

Gold News

Dogecoin price to provide a buying opportunity before exploding 35%

Dogecoin price to provide a buying opportunity before exploding 35%

Dogecoin price sees a slow decline in bullish momentum as a major hurdle puts an end to its explosive move. A pullback is emerging for DOGE and is likely an opportunity that will allow bulls to recuperate and prepare for the next rally.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!