AUD/USD falls to lowest level since April 2020 amid broad dollar strength

• AUD/USD falls to its lowest level since April 2020 amid a fresh dollar rally.
• Expectations of an aggressive rate hike from the Fed and high yields on US bonds continue to support the dollar.
• Risk aversion also helps drive money flows away from the risk-sensitive AUD.

The pair AUD/USD comes under new selling pressure on Wednesday and slips below the 0.6400 level for the first time since April 2020. The pair maintains its selling tone at the start of the European session and is currently hovering around the 0.6365 region, down more than 1.0% on the day.

A combination of supportive factors lifts the US dollar to a new two-decade high, which in turn puts downward pressure on the AUD/USD pair. Comments from Fed officials the day before reaffirm the outlook for more aggressive tightening of monetary policy by the Fed and continue to support a further rise in US Treasury yields. This, along with the state of risk aversioncontinues to prop up the US dollar as a safe haven.

Indeed, Minneapolis Fed President Neel Kashkari stated Tuesday that policymakers are determined to do what is necessary to reduce inflation. In addition, the president of the Chicago Fed, Charles Evans, pointed out that the US central bank. will have to raise interest rates to a range between 4.50% and 4.75%. The benchmark 10-year US bond yield shot up to 4% for the first time since April 2010 following these comments.

Investors, for their part, continue to concerned about the possibility that the Fed’s policy will lead the economy into a recession. Furthermore, the risk of a further escalation of the conflict between Russia and Ukraine continues to weigh on global risk sentiment. This is evident in a weaker tone around equity markets, which is driving money flows into the USD and contributing to the risk-sensitive selling bias around the AUD.

With the latest move lower, the AUD/USD pair confirms this week’s bearish breakout through the lower end of a multi-month descending channel. A further drop and acceptance below the 0.6400 level could have already set the stage for an extension of the bearish trajectory. Therefore, some continuation weakness towards the test of the next relevant support, around the 0.6300 level, remains a distinct possibility.

AUD/USD technical levels