AUD/USD bears aim for 0.6215 during seven-day downtrend, Fed Minute in the spotlight
- AUD/USD drops back towards 30-month low as US dollar regains upside momentum.
- RBA versus Fed divergence, risk aversion favor bulls amid firmer yields.
- RBA’s Ellis failed to impress buyers with mixed comments, growth concerns exert downside pressure.
- Bears await FOMC Minutes to confirm hawkish Fed bets.
AUD/USD prints a seven-day downtrend around the 2.5-year bottom, holding lower grounds near 0.6260 during Wednesday’s Asian session. In doing so, the Aussie pair portrays the market’s sour sentiment and the US dollar’s strength ahead of the all-important Fed Minutes. That said, the Aussie pair’s corrective bounce off the multi-day low, marked the previous day, could be termed as the pre-event consolidation as the buyers couldn’t keep the reins amid fears of economic slowdown and the hawkish Fed bets.
Earlier in the day, Reserve Bank of Australia (RBA) Assistant Governor Luci Ellis mentioned, that the central bank’s policy is no longer in expansionary place. However, comments like, “The neutral rate was a moving target and hard to determine at any stage in time,” seemed to have weighed on the AUD/USD prices.
On the other hand, Cleveland Fed President Loretta Mester recently mentioned that the Federal Reserve needs to hike rates further because inflation has not slowed during her speech.
It should be noted that the CME’s FedWatch Tool signals a nearly 78% chance of the Fed’s 75 basis points (bps) of a rate hike in November. Furthermore, US inflation expectations, as per the 10-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, rose to the highest levels since September 28 while flashing 2.31% level at the latest.
Other than what’s already mentioned above, the global growth fears, raised by the International Monetary Fund’s (IMF) latest projections also weigh on the AUD/USD prices, due to its risk barometer status. On Tuesday, the IMF lowered the global economic growth forecast for 2023 to 2.7% from 2.9% estimated in July while citing pressures from high energy and food cost, rate hikes as the key catalysts for the move. It’s worth noting that the Washington-based institute left the 2022 growth forecast unchanged at 3.2% versus 6.0% global growth in the 2021"
Amid these plays, the US 2-year Treasury yields reverse the previous day’s pullback from a two-week top while picking up bids near 4.31% by the press time.
Moving on, AUD/USD traders should pay attention to the risk catalysts and can keep the bearish outlook ahead of the Federal Open Market Committee (FOMC) Meeting Minutes. While the bears are likely to keep control, any surprises from the Fed Minutes won’t be taken lightly and hence should be traded with caution.
Technical analysis
One-month-old bearish trend channel, currently between 0.6145 and 0.6450, keeps AUD/USD sellers hopeful of refreshing the multi-day low.