The AUDUSD is consolidating three-day losses amid contradictory signals and cautious markets.
The AUDUSD pair remains slightly bid around 0.6790, having posted its first daily gains in four days. While bouncing from the previous day’s one-week low. However, the Aussie pair’s recovery during early Wednesday’s Asian session could be linked to the market’s preparations for this week’s important event. Namely Fed Chair Jerome Powell’s bi-annual testimony.
Bears fail to defend hawkish RBA Minutes in the face of confusing messages from Bullock and a PBoC rate decrease.
It’s important mentioning that market sentiment is still shaky. Which allows Despite hawkish Fed signals and risk-negative headlines surrounding China. The risk-barometer AUDUSD pair is licking its wounds near the lowest levels in a week. It’s also worth noting the Reserve Bank of Australia’s (RBA) hawkish Minutes contrasted. The People’s Bank of China’s (PBoC) rate drop, as well as RBA Assistant Governor Michele Bullock’s cautious remarks.
The news that US President Joe Biden dubbed Chinese President Xi Jinping a dictator. On Tuesday propelled the AUDUSD pair’s recovery moves towards the intraday high. The remarks highlight grave concerns about US-China relations after US Secretary of State Antony Blinken’s visit to Beijing yielded no significant results. The same should keep Aussie pair sellers optimistic.
Along the same line, The AUDUSD bears are encouraged by Australia’s Westpac Leading Index for May. Which fell to -0.27% from -0.03% previously.
The previous day, the RBA Minutes justified the second straight hawkish surprise by calling it a ruse to promote confidence. That inflation will return to normal sooner. However, RBA Deputy Governor Michele Bullock stated that higher rates are the RBA’s only instrument for containing inflation. The policymaker also stated that employment and the economy must expand below trend for a while.
It should be mentioned that sentiment deteriorated. After the People’s Bank of China (PBoC) dropped two major lending rates (LPR and MLF) for the first time in nearly a year.
Upbeat US housing statistics, Fed negotiations favored the US Dollar ahead of the recent decline amid pre-event positioning, and Powell’s testimony is being watched.
Furthermore, hawkish remarks from Fed officials and positive US statistics. Fed governor and Vice Chair Nominee Philip Jefferson stated on Tuesday. “I remain focused on returning it to our 2% target.” In a similar vein, Federal Reserve Governor Lisa Cook stated, “I am committed to promoting sustained economic growth in a context of low and stable inflation,” in a statement to be delivered before the Senate on Wednesday. According to the prepared statements for Wednesday’s Testimony, Fed Board nominee Adriana Kugler also emphasized that bringing inflation to the central bank’s 2% target is critical to laying a solid basis for the US economy.
Nonetheless, US Housing Starts increased 21.7% MoM in May, above the -2.9% (revised from +2.2%) recorded in April. in April, with a -0.8% market projection. Building Permits were similarly positive for the month, up 5.2% MoM versus -5.0% projected and -1.4% previously (reduced from -1.5%).
While reflecting the sentiment, the Wall Street benchmark started the week lower, while US Treasury bond yields likewise ended a two-day gaining streak.
Moving on, despite the recent corrective recovery, the AUDUSD remains under pressure as market participants await Fed Chair Jerome Powell’s bi-annual testimony.
AUDUSD Technical Outlook
Although the 200-day Exponential Moving Average (EMA) limits the AUDUSD pair’s immediate downward at 0.6760, a recovery remains difficult till the pair crosses the previous support line stretched from May 31, close to 0.6935 at the time of publication. Having said that, the monthly high of Bulls should keep an eye on 0.6900 as a nearby upward hurdle.
