- AUD/USD holds lower ground near yaerly bottom even as RBA Deputy Governor Bullock shows readiness for higher rates.
- Australia’s lack of need for capital injection, despite RBA’s heavy bond buying favor buyers.
- Pessimism surrounding China, hawkish Fed bets keep bears hopeful.
- Pre-Fed anxiety to restrict immediate moves, risk catalysts may entertain intraday traders.
AUD/USD struggles to justify comments from the Reserve Bank of Australia (RBA) official amid the pre-Fed jitters during early Wednesday. In doing so, the Aussie pair grinds lower around the two-year bottom marked the last week, close to 0.6680 by the press time.
RBA Deputy Governor Guy Bullock said, “Negative equity position will not affect RBA’s ability to do its job.” His comments were in line with the previous day’s RBA Minutes that showed the policymakers’ readiness for higher rates but also mentioned, “Interest rates have increased quite quickly and were getting closer to normal settings.”
Other than the RBA chatters, fears of the faster Fed rate hike and hawkish statements from the Federal Open Market Committee (FOMC) also weigh on the AUD/USD prices. Recently, Reuters mentioned that the Fed started a two-day meeting on Tuesday, with rate futures traders pricing in an 83% chance of a 75 basis-point hike and a 17% probability of a 100 bps tightening.
In addition to the hawkish Fed bets, headlines concerning China and Russia also exert downside pressure on the AUD/USD prices. Reuters reported that the Asian Development Bank (ADB) on Wednesday cut its growth forecasts for developing Asia for 2022 and 2023 amid mounting risks from increased central bank monetary tightening, the fallout from the war in Ukraine and COVID-19 lockdowns in China. Joining the line is the news of a snap lockdown in the steel hub of Tangshan, due to China’s zero covid policy, which recently challenged the market sentiment and strengthened the safe-haven demand. Furthermore, headlines suggesting US Senators’ demand for secondary sanctions on Russian oil also appear to challenge the market’s risk appetite.
Against this backdrop, the S&P 500 Futures lick its wounds near 3,875 after declining the most in one week the previous day whereas the US benchmark Treasury bond yields retreat from the multi-day high. That said, the US 2-year Treasury yields jumped to the highest level in 15 years while the 10-year counterpart also rose to the 11-year top during the pre-Fed cautious mood.
Moving on, risk catalysts may try to entertain AUD/USD traders amid likely inaction during the pre-Fed anxiety. On a broader front, the Fed’s hawkish rate action needs validation from the upbeat economic forecasts and positive speech from Fed Chairman Jerome Powell to renew the Aussie pair’s upside moves.
Technical analysis
Unless crossing the 10-DMA resistance, around 0.6750 by the press time, the AUD/USD pair becomes vulnerable to drop towards a one-month-old descending support line, close to 0.6470 at the latest.
