AUD/USD slides towards 0.6900 as Aussie FinMin fears economic hardships

AUD/USD can’t cheer the US dollar weakness for long as it drops back to 0.6910, after snapping a two-week downtrend on Friday. That said, the Aussie pair portrays the economic fears surrounding Australia, as well as the global economy, while reversing the previous day’s run-up during Monday’s Asian session.

Australian Finance Minister (FinMin) Katy Gallagher crossed wires during the weekend, via AAP Australian General News, as she concedes Australia is facing economic challenges. The policy’s comments follow warnings the global economy risks a toxic mix of low growth and high inflation, also known as stagflation, per the news shared via Reuters.

Elsewhere, Australia's Treasurer Jim Chalmers also mentioned fears of higher inflation during the weekend while expecting a 7.0% figure and agreeing with a forecast by the central bank.

On Friday, Reserve Bank of Australia Governor Philip Lowe said that he does not expect a recession in Australia but acknowledged that there is a narrow path back to low inflation, as reported by Reuters.

It’s worth noting that Reuters came out with the news suggesting that the Bank for International Settlements (BIS) calls for interest rates to be raised "quickly and decisively" to prevent the surge in inflation from turning into something even more problematic.

During the weekend, International Monetary Fund (IMF) Managing Director Kristalina Georgieva crossed wires while saying, “Further negative shocks would inevitably make US economic situation ‘more difficult’.” It’s worth noting that the IMF revised down US 2022 GDP forecasts to 2.9% versus the 3.7% predicted earlier.

The US New Home Sales for May, by 10.7% versus April’s revised figures of -12.0%, joined the record low print of the final reading of the University of Michigan's Consumer Sentiment Index for June, to 50.0 from 50.2 initial estimates, also drowned the US dollar.

While portraying the mood, S&P 500 Futures fail to track Wall Street’s gains, down 0.30% intraday at the latest, whereas the US 10-year Treasury yields rise 1.5 basis points (bps) to around 3.13% after posting the first weekly loss in four.

Moving on, US Durable Goods Orders for May, expected 0.1% versus 0.5% prior, as well as the Pending Home Sales, expected -2.0% versus -3.9% prior, will be important for daily directions. However, Wednesday’s debate of the US and the UK and the European central bankers at the ECB Forum on Central Banking will be an important event to watch for clear market directions.

Technical analysis

Although an upward sloping trend line from May 12 restricts the short-term downside around 0.6885, the AUD/USD pair’s pullback from the 10-DMA level of 0.6945 keeps the bears hopeful.