AUD/USD near daily low and sustained above 0.6700 awaiting Powell

• AUD/USD pulled back on Thursday following the less hawkish comments from RBA Lowe.
• The dollar with mixed results on Thursday.
• Ahead: ECB decision and Fed chief Powell’s speech.

The AUD/USD struggling to take advantage of the nice rebound from levels below 0.6700 (low since 14 Jul). The advance has capped below 0.6770 and is trading around 0.6730, after finding support above 0.6710.

The Australian dollar came under further selling pressure after the governor of the Reserve Bank of Australia (RBA) Philip Lowe signaled a possible end to sharp interest rate hikes. Lowe said policy has been tightening too quickly, noting lags in its impact on the economy and that the case for a slower pace of interest rate increases is getting stronger. This, in turn, forced traders to cut bets for another 50 basis point rate hike in 2022.

Elsewhere, the US dollar halts the previous day’s sharp pullback from a two-decade high and remains supported by hawkish Fed expectations. Indeed, markets seem convinced that the Fed will continue to tighten monetary policy at a faster pace to control inflation and has been pricing in a 75 basis point rate hike in September. Aside from this, the cautious mood is further underpinning the safe haven dollar.

The prospect of rapid interest rate hikes, coupled with headwinds from new COVID-19 restrictions in China and a prolonged war in Ukraine, have fueled recession fears. This continues to weigh on investor sentiment, contributing to some weakness in the Aussie.

Thursday’s attention will be focused on the scheduled speech of the president of the Federal Reserve, Jerome Powell, which will be delivered later in the North American session. In addition, the operators will take note of the decision of the European Central Bankwhich should instill some volatility in the forex markets and help traders take advantage of short-term opportunities around the majors.

Technical levels