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AUD/USD falls to 2-week low and targets 0.6850 ahead of Powell

  • AUD/USD loses ground for the third day in a row and falls to a two-week low on Wednesday.
  • Recession fears weigh on investor sentiment and drive flows away from the risk-sensitive AUD.
  • Lower US bond yields cap the USD and could help limit losses for the pair ahead of Fed Chairman Jerome Powell’s speech.

The pair AUD/USD witnesses some selling for the third day in a row on Wednesday and drops to a two-week low, around the region of 0.6865 during the first part of the European session.

The worsening global economic outlook continued to weigh on investor sentiment, which was evident in the cautious sentiment prevailing in stock markets. This overshadowed encouraging retail sales data from Australia and continued to act as a headwind for the Aussieof higher perceived risk.

On the other hand, the US dollar received some support from statements the day before by New York Fed President John Williams and San Francisco Fed Governor Mary Daly, who Expectations rose for an aggressive Fed rate hike. This was seen as another factor putting downward pressure on the AUD/USD pair.

However, market participants continue divided on prospects for faster Fed policy tightening amid growing recession fears. This coupled with a further move lower in US Treasury yields capped the dollar and could help limit deeper AUD/USD losses.

Investors also seemed reluctant to open aggressive positions, preferring to wait for Fed Chairman Jerome Powell’s speech at the ECB forum in Sintra. Powell’s comments will be scrutinized for clues on the outlook for Fed monetary policy, which could give AUD/USD a further boost.

However, the fundamental background seems to be leaning in favor of the bears and supports the prospects for a further short-term move lower for the AUD/USD pair. Therefore, a pullback towards 0.6850 is possible, on the way to the yearly low reached in May.

Technical levels to watch

AUD/USD

Overview
last price today 0.6883
daily change today -0.0022
Today’s daily variation in % -0.32
Daily opening today 0.6905
Trends
daily SMA20 0.7037
daily SMA50 0.7072
daily SMA100 0.7208
daily SMA200 0.7229
levels
Previous daily high 0.6965
Previous Daily Low 0.6903
Previous Weekly High 0.6997
Previous Weekly Low 0.6868
Previous Monthly High 0.7267
Previous Monthly Low 0.6828
Daily Fibonacci of 38.2% 0.6927
Daily Fibonacci of 61.8% 0.6941
Daily Pivot Point S1 0.6884
Daily Pivot Point S2 0.6862
Daily Pivot Point S3 0.6822
Daily Pivot Point R1 0.6946
Daily Pivot Point R2 0.6986
Daily Pivot Point R3 0.7008

Source: Fx Street

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