- AUD/USD finds fresh selling on Wednesday and pulls back to the 0.6900 level.
- Expectations around the Fed rate hike and risk-off sentiment buoyed the safe-haven USD and weighed on the perceived riskier AUD.
- The spotlight remains on Fed Chairman Jerome Powell’s two-day testimony to Congress.
The pair AUD/USD came under renewed selling pressure on Wednesday and fell to a new weekly low, around the 0.6885 area at the start of the European session. The drop comes after repeated failures against the psychological level of 0.7000 in the last two sessions and favors the bears amid the appearance of new purchases around the US dollar.
The firm expectations that the Federal Reserve will maintain its aggressive policy of tightening to curb rising inflation turned out to be a key factor that continued to support the dollar. In fact, the markets anticipate a further interest rate hike of 75 basis points at the next FOMC meeting in Julyand these bets were bolstered by comments from Fed Governor Christopher Waller on Sunday.
Investors also seem concerned that more aggressive action by major central banks to combat stubbornly high inflation will challenge global economic growth. This, in turn, dented risk sentiment, which was reflected in a further move lower in equity markets. The risk-off monetary flow further benefited the safe-haven US dollar and weighed on the higher-perceived risk AUD.
With the latest move lower, the AUD/USD pair has erased its modest weekly gains. A continuation of the selling, leading to a break of the 0.6900 level, would be seen as a new trigger for the bears. This would pave the way for another short-term bearish move and drag the pair to challenge the monthly low around 0.6850.
Market participants are now focused on Fed Chairman Jerome Powell’s semi-annual testimony before the Senate Banking Committee later in the North American session. Investors will look to US bond yields and broader market risk sentiment as a benchmark. The combination of factors will boost demand for the dollar and provide a further boost to the AUD/USD pair.
AUD/USD technical levels
Source: Fx Street
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