• RBA’s Lowe hints to a possible rate cut at June policy meeting.
• Rising US bond yields underpin USD and add to the selling bias.
The AUD/USD pair extended its sharp intraday slide and has now dropped back closer to 4-1/2 month lows, set last Friday.
The early optimism at the start of a new trading week, led by a surprisingly positive outcome from the Australian election faded rather quickly on the back of news that China is considering suspending business with suppliers who agreed to halt supplying Huawei. The pair failed to capitalize on the weekly bullish gap opening, albeit managed to end the day with modest gains and managed to regain some positive traction during the Asian session on Tuesday.
The uptick, however, fizzled out following the release of dovish sounding RBA monetary policy meeting minutes. The selling pressure aggravated further after the RBA Governor Philip Lowe - speaking at the Economic Society of Australia Business Lunch in Brisbane this Tuesday, sounded dovish over the labour market/growth data and said that the central bank will consider the case for lower interest rates at its June policy meeting.
The pair weakened back below the 0.6900 handle and was further pressurized by a modest US Dollar uptick, which remained supported by higher US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond climbed to over one-week tops after the Fed Chair Jerome Powell said that it was premature to make a judgment about the impact trade and tariff issues could have on monetary policy and dampened rate cut hopes.
It would now be interesting to see if the pair is able to find any buying interest at lower levels or the ongoing slide marks the resumption of the prior/well-established bearish trend amid the recent escalation in the US-China trade tensions and relatively thin US economic docket - featuring the only release of existing home sales data, later during the early North-America session.
Technical levels to watch
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