AUD/USD stays depressed around 0.7500 amid risk aversion post RBA showdown
- AUD/USD holds lower ground following the heaviest drop in a week.
- Hawkish RBA couldn’t save bulls as US return weighs on the risk appetite.
- Downbeat US data, covid woes gain major attention.
- Light calendar in Asia focuses on risk catalysts, FOMC Minutes become the key event today.
AUD/USD justifies downbeat market sentiment, as well as firmer USD, as failing the RBA’s optimism to print around 100 pips of a decline, before recently taking rounds in a 10-pip range. That said, the quote seesaws around 0.7500 amid the early Asian session on Wednesday.
No cheers for RBA…
Despite altering weekly bond purchases and adjusting the language to back the odds of an early rate hike, the Reserve Bank of Australia (RBA) couldn’t keep the AUD/USD bulls happy, snapping two-day recovery moves on the contrary. In doing so, the Aussie central bank matched wide market expectations of keeping the monetary policy unchanged and holding the April 2024 bond target intact.
Following the rate decision, RBA Governor Philip Lowe said, “The condition for an increase in the cash rate depends upon the data, not the date.” The central banker also signaled the inflation target to be achieved by mid-2023 while sticking to 2024 rate hike concerns.
The AUD/USD prices initially buoyed on the RBA but couldn’t withstand the risk-off mood while losing over 100 pips afterward. The reason could be linked to the receding economic optimism concerning the US after the ISM Services PMI dropped below 63.5 forecast to 60.1 in June, versus 64.0 prior.
Also weighing on the market sentiment were the fears of the coronavirus (COVID-19) variant. Recently, the strain called Epsilon, traced from California, gained major attention due to its resistance to the vaccines. Additionally magnifying the covid concerns were the chatters backing the third wave in next one month or a two.
At home, Victoria marks the sixth day without any local cases but aims to keep activity restrictions as Aussie banks, restaurants and supermarkets back the vaccination campaign. Further, the national infections also eased from 49 for Monday to 26 the previous day.
Amid these plays, Wall Street closed mixed as a slump in the US Treasury yields saved tech-heavy Nasdaq. The US 10-year Treasury yields dropped 8.1 basis points (bps), the most since late February, to 1.35% by the end of Tuesday’s North American trading.
Moving on, risk catalysts can entertain AUD/USD traders amid a lack of major data/events in Asia. However, cautious sentiment ahead of the Federal Open Market Committee (FOMC) Meeting Minutes can add to the market’s risk-off mood and weigh on the quote.
Read: What yield drop ahead of Fed minutes means for dollar
Technical analysis
Failures to keep a month-old trend line breakout redirects AUD/USD bears to the yearly low of 0.7444 before highlights August 2020 top of 0.7416. Meanwhile, the stated resistance line around 0.7520, followed by the 200-DMA level of 0.7575 restricts short-term upside momentum.