AUD/USD Nears Key Support as Fed Rate Hike Speculation Aggravates Sentiment

• AUD/USD falls 0.40% and struggles to hold the 0.6500 level as Federal Reserve officials hint that the rate hike is not going to end.
• US Treasury yields fall, but the Dollar rebounds from two-month lows, a sign of a cautious market as traders keep an eye on Fed Chair Powell’s upcoming speech.
• Despite the RBA rate hike and hawkish outlook, the Australian Dollar fails to recover as the market anticipates the end of the RBA tightening cycle ahead of the SoMP release.

The AUD/USD pair continues to fall towards the 50-day moving average (DMA), after failing to overcome the 0.6500 zone on Tuesday, which aggravated the decline of the pair, which is trading at 0.6410, with losses of 0.40%, last the middle of the North American session.

The Australian Dollar retreats to 0.6410, flirting with the 50-day moving average amid the Fed’s hawkish rhetoric and the RBA’s rate hike.

Risk appetite is taking its toll following statements by Federal Reserve officials who oppose the idea of ​​cutting interest rates, led by Minnesota Fed President Neil Kashkari, who questioned whether the Fed would have raised rates enough given the resilience of the economy, while adding that a spike in inflation would trigger another rate hike by the Fed. Michelle Bowman echoed some of his comments, saying they are necessary new rate increases.

Against this backdrop, US Treasury yields continued to fall, while the Dollar rebounded from two-month lows of 104.84 to 105.51 in the last three trading days.

In Australia, the Reserve Bank of Australia (RBA) raised rates by 25 basis points and, despite its hawkish speech assuming that inflation would remain high for longer, participants market analysts estimate that the RBA has ended its tightening cycle.

Following the RBA meeting, the AUD/USD pair has been on the defensive, falling more than 1.45%, erasing nearly 100 points of last week’s accumulated gains.

Given the fundamental backdrop, AUD/USD traders would be keeping an eye on Federal Reserve Chair Jerome Powell’s speech on Thursday. On the Aussie front, the RBA would reveal its Statement of Monetary Policy (SoMP) following Powell’s comments.

AUD/USD technical levels