The AUD/USD currency pair has been trading lower during the past few days, with the pair currently trading near the six-week bottom. This is due to a combination of factors, including hawkish bets from the Federal Reserve, hesitancy from the Reserve Bank of Australia (RBA) to renew a hawkish bias despite signaling higher rates and inflation fears, and strong US data that have propelled US Treasury bond yields and the US Dollar, weighing on the Aussie price.
RBA Governor Philip Lowe’s Testimony to the House Economics Committee early Friday in Asia highlighted the importance of high inflation, stating that it is “damaging and corrosive”. He also noted that the RBA is “not done yet on rates”. RBA Assistant Governor (Economic) Luci Ellis also commented on the labor market, noting that “a huge number of people are awaiting new jobs”.
The hawkish sentiment from the Federal Reserve has been bolstered by comments from St. Louis Federal Reserve’s James Bullard and Cleveland Fed President Loretta Mester. Bullard stated that “Continued policy rate increases can help lock in a disinflationary trend during 2023”, while Mester noted that the Fed will need to go above 5% and stay there for a while. This has been supported by strong US data, including a jump in the Producer Price Index (PPI) for January and an improvement in the US Initial Jobless Claims for the week ended on February 10.
US President Joe Biden’s recent comments on his Chinese counterpart have also weighed on the market sentiment and the AUD/USD price. This, coupled with Wall Street closing negative and the S&P 500 Futures dropping 0.30% intraday, has kept the AUD/USD bears hopeful.
From a technical perspective, a daily closing below the 50-DMA, currently around 0.6885, could direct AUD/USD price towards the 200-DMA key support surrounding the 0.6800 round figure. This is backed by bearish MACD signals and an absence of oversold RSI (14).
In conclusion, the AUD/USD currency pair is likely to remain under pressure in the near-term, as the combination of hawkish bets from the Federal Reserve, hesitancy from the Reserve Bank of Australia (RBA) to renew a hawkish bias, strong US data, and risk-off sentiment weigh on the Aussie price. Technical signals also suggest that the pair is likely to remain bearish in the near-term, with a daily closing below the 50-DMA potentially directing the pair towards the 200-DMA key support surrounding the 0.6800 round figure. That said, risk catalysts will be important for fresh impulse amid a light calendar.
