- AUD/USD lacked firm direction and saw good price moves both ways on Wednesday.
- Aggressive bets on a Fed rate hike and a weaker risk tone underpinned the dollar and acted as a headwind.
- Very encouraging Reserve Bank of Australia (RBA) Tuesday meeting minutes supported the aussie and helped limit losses.
The pair AUD/USD fluctuated between tepid gains and small losses in mid-European session and now appears to have stabilized in neutral territory around the 0.7020 area.
After an early rally to a one-week high, the AUD/USD pair saw a modest intraday pullback from around the mid-0.7050 on Wednesday, amid the appearance of some US dollar buying. Federal Reserve Chairman Jerome Powell struck a more hawkish tone on Tuesday, saying he will support rate hikes until prices begin to fall toward a healthy level. The comments reaffirmed market bets on more aggressive policy tightening by the Fed and helped the dollar stem its recent sharp decline from two-decade highs.
Investors also remain concerned that the Russia-Ukraine war and the latest COVID-19 lockdowns in China will affect global economic growth. This was reflected in the generally weaker tone of equity markets, which further benefited the safe-haven dollar and pushed flows away from the perceived riskier aussie. Meanwhile, the Reserve Bank of Australia, in the Minutes of its last meeting, noted that a further hike in interest rates in June is still possible, which, in turn, helped limit AUD losses. /USD.
The pair showed some resistance below the key psychological level 0.7000. This, in turn, warrants some caution for bearish traders and before positioning themselves for a resumption of the recent decline witnessed in recent months. Market participants now await US housing market data: building permits and housing starts. This, coupled with US bond yields and general market risk sentiment, will influence USD price dynamics and allow traders to take advantage of short-term opportunities around the AUD/USD pair.
Technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
