AUD/USD ends week lower, pressured by RBA stance and Powell’s hawkish stance

• The AUD/USD pair was down 0.12% on the day, marking a significant weekly drop from 0.6522 to 0.6338.
• The RBA’s 25 basis point rate hike under new Governor Michele Bullock fails to give an upward boost to the Australian dollar.
• Jerome Powell’s hawkish tone on US monetary policy adds to the AUD’s woes, with China’s economic slowdown posing additional risks.

The pair AUD/USD lost 0.12% and extended its significant losses during the week, in which the pair has gone from a weekly high of 0.6522 to a low of 0.6338. At the time of writing, the pair is trading at 0.6358.

RBA rate hike fails to inspire Australian dollar, while Fed chair’s remarks bolster US dollar

The Reserve Bank of Australia (RBA) raised rates by 25 basis points, from 4.10% to 4.35%. However, he failed to adopt a hardline stance, which was the first monetary policy decision led by Governor Michele Bullock. On Tuesday, the pair plummeted more than 50 points, losing 0.81%.

Despite this, dovish comments from several members of the Federal Reserve kept AUD/USD afloat until Thursday, when Fed Chair Jerome Powell was more hawkish than expected. He commented that policymakers at US central banks are not sure that current monetary policy is sufficiently restrictive, and stressed that they would raise rates if necessary. In his speech, he acknowledged that inflation is slowing, but remains above the 2% target.

Against this backdrop, the AUD/USD pair failed to extend last week’s uptrend, weighed down by fundamentals and market sentiment. Furthermore, a deflationary scenario in China hurts the AUD’s prospects, due to Australia’s dependence on its largest trading partner. Further deterioration in the Chinese economy would dent Australia’s prospects, suggesting further AUD/USD weakness lies ahead.

Next week, the Australian economic agenda will include NAB Consumer Confidence and employment data. In the US, inflation data, jobless claims and Fed statements will provide some clues about the state of the US economy.

AUD/USD Price Analysis: Technical Outlook

AUD/USD price action sees the pair reversing most of its losses during November, with the bears in control. An initial “evening star” chart pattern opened the door to consolidation, but a drop below the Nov. 7 low of 0.6403 exacerbated the slide below the 0.6350 signal.

The ongoing hammer formation could pave the way to consolidate the AUD/USD around the current exchange rates, but if sellers push prices below 0.6300, it could pave the way to test the low of the year to date at 0.6270. On the other hand, if buyers lift AUD/USD beyond the 50-day moving average (DMA) at 0.6387, that could open the door to reclaim 0.6400, before retesting 0.6500.