- AUD/USD met with a fresh supply on Wednesday and dropped back closer to the 0.6900 mark.
- Fed rate hike bets, the risk-off mood boosted the USD and weighed on the risk-sensitive aussie.
- The market focus remains glued to Fed Chair Jerome Powell’s two-day congressional testimony.
The AUD/USD pair came under some renewed selling pressure on Wednesday and dropped to a fresh weekly low, around the 0.6910-0.6905 region during the early European session. The downfall comes on the back of repeated failures ahead of the 0.7000 psychological mark over the past two trading days and favours bearish traders amid the emergence of fresh US dollar buying.
Firming expectations that the Federal Reserve would retain its aggressive policy tightening stance to curb soaring inflation turned out to be a key factor that continued lending support to the USD. In fact, the markets are pricing in another 75 bps rate hike at the next FOMC meeting in July and the bets were reaffirmed by Fed Governor Christopher Waller's comments on Sunday.
Investors also seem worried that a more aggressive move by major central banks to combat stubbornly high inflation would pose challenges to global economic growth. This, in turn, took its toll on the risk sentiment, which was evident from a fresh leg down in the equity markets. The anti-risk flow further benefitted the safe-haven buck and weighed on the risk-sensitive aussie.
With the latest leg down, the AUD/USD pair has erased its modest weekly gains. Some follow-through selling, leading to a subsequent break through the 0.6900 mark, would be seen as a fresh trigger for bearish traders. This would pave the way for a further near-term depreciating move and drag spot prices back towards challenging the monthly low, around mid-0.6800s.
Market participants now turn their focus to Fed Chair Jerome Powell's semi-annual testimony before the Senate Banking Committee, due later during the North American session. Traders will take cues from the US bond yields and the broader market risk sentiment. The combination of factors would drive the USD demand and provide a fresh trading impetus to the AUD/USD pair.
Technical levels to watch
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.
Recommended content
Editors’ Picks
EUR/USD stays below 1.0700 ahead of US data
EUR/USD stays in a consolidation phase slightly below 1.0700 in the European session on Wednesday. Upbeat IFO sentiment data from Germany helps the Euro hold its ground as market focus shifts to US Durable Goods Orders data.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold manages to hold above $2,300
Gold struggles to stage a rebound following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% ahead of US data, not allowing XAU/USD to gain traction.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.