AUD/USD plummets towards 0.6700 even as RBA lifts interest rate by 25 bps, Fed's Powell eyed

• AUD/USD takes offers to refresh intraday low, reverses early-day gains on RBA moves.
• RBA matches 0.25% rate hike concerns to lift OCR to 3.60%.
• Fresh US-China tension, cautious mood ahead of Fed Chair Powell’s testimony also weigh on the risk barometer pair.

AUD/USD stands on slippery grounds as it drops nearly 30 pips to 0.6715 after the Reserve Bank of Australia (RBA) announced a monetary policy decision on early Tuesday. Adding strength to the Aussie pair’s pullback could be the geopolitical concerns surrounding the US-China ties.

RBA matches market forecasts of lifting the benchmark interest rate by 25 basis points (bps) to 3.60%. The Aussie central bank even said that the RBA expects further monetary tightening will be needed. However, fears of a lack of upside room for the Official Cash Rate (OCR) and an absence of hawkish surprise seem to have weighed on the AUD/USD price. On the same line could be the RBA Statement saying that the Consumer Price Index (CPI) indicator hints at the inflation peak.

Also read: Breaking: RBA hikes OCR by 25 bps to 3.60% in March, as expected

Earlier in the day, Australia’s January monthly Trade Balance came in softer but the details surrounding the Exports and Imports joined upbeat comments from Aussie Prime Minister Anthony Albanese to favor the buyers. Australia PM Albanese said earlier in the day, “I believe Australia can avoid a recession.” The policymaker also said that the relationship with China has improved.

Though, fears of fresh US-China tussles, due to the likely meeting between the officials from the US and Taiwan, as well as amid Beijing’s criticism of Washington’s cold war strategies, seem to challenge the AUD/USD pair of late due to its risk-barometer status.

While portraying the mood, S&P 500 Futures print mild gains around a two-week high marked the previous day, up 0.15% intraday near 4,060 at the latest. However, US 10-year Treasury bond yields initially dropped to a one-week low of 3.897% on Monday before ending the day with mild gains near 3.96%, staying around the same level by the press time. On the same line, the two-year counterpart ended Monday’s North American trading session with 0.60% intraday gains at 4.88%, mostly unchanged at the latest.

Moving ahead, AUD/USD traders should pay attention to Fed Chair Powell’s Testimony and Wednesday’s speech of RBA Governor Philip Lowe for clear directions.

Technical analysis

A five-week-old descending resistance line precedes the 200-DMA to restrict short-term AUD/USD up-moves around 0.6745 and 0.6790 in that order, making the pair lucrative for the bears below the stated hurdles.