AUD/USD eyes further downside as bears prod 0.6600 amid banking woes ahead of US Q1 GDP

• AUD/USD licks its wounds at the lowest levels in six weeks.
• Mostly downbeat risk profile, mixed Aussie inflation clues weigh on AUD/USD price.
• Cautious mood before US GDP, First Republic Bank-inflicted fears and voting on US debt ceiling increase favor Aussie pair bears.
• Australia Export, Import Price Indexes for Q1 will be eyed ahead of the US growth figures.

AUD/USD consolidates recent losses at the 1.5-month low as it flirts with the 0.6600 round figure during early Thursday morning in the Asia-Pacific zone. In doing so, the Aussie snaps two-day downtrend but the bearish bias remains intact amid multiple negatives to the risk profile and surrounding the Reserve Bank of Australia’s (RBA) next move.

On Wednesday, downbeat Aussie inflation numbers justify the RBA’s pause in rate hike trajectory and suggested one such move in the next monetary policy meeting of the Australian central bank. However, the details weren’t too bad and hence may allow the RBA to show readiness of further rate hikes if needed.

That said, Australia’s Monthly Consumer Price Index (CPI) dropped to 6.1% YoY in March versus 6.6% expected and 6.8% prior. On the same line, the Q1 CPI also eased to 1.4% QoQ from 1.9% in previous readings but crossed the 1.3% market forecasts. Further, the RBA Trimmed Mean CPI declined below 1.4% consensus and 1.7% prior to 1.2% QoQ in the first quarter (Q1).

On the other hand, US Durable Goods Orders rose by 3.2% in March versus 0.8% expected and -1.2% prior. Further details suggest that the Durable Goods Orders ex Transportation and ex Defense also rose past market forecasts and previous readings in March.

It’s worth noting that the cautious mood surrounding the US debt ceiling expiration exerts downside pressure on the AUD/USD price as most policymakers aren’t agreeing on the measures suggested by US President Joe Biden. It should be observed that the US House of Representatives currently votes on a bill suggesting the increase in the debt ceiling and to cut government spending, known as the "Limit, Save, Grow Act". Although the passage of the bill is only one step closer to the final destination, any disappointment can add to the risk-off mood and exert more downside pressure on the AUD/USD.

Elsewhere, market sentiment sours amid escalating fears from the First Republic Bank (FRB) after the troubled bank’s shares dropped another 20% on Wednesday, following a 50% slump the previous day. With this, the FRB is likely to face the limits on its Fed borrowings, which in turn spreads the ripple effect across the markets and weighs on the risk appetite and the Aussie pair.

Against this backdrop, the US Dollar Index (DXY) dropped to the lowest levels in two weeks before paring some of the daily losses to end Wednesday’s trading near 101.43. Further, Wall Street closed mixed while the United States Treasury bond yields are mostly sidelined.

Given the mostly downbeat market sentiment and dovish bias surrounding the RBA, the AUD/USD pair is likely to remain pressured ahead of the key US first quarter (Q1) Gross Domestic Product (GDP), expected to ease to 2.0% on an annualized basis versus 2.6% prior. On an immediate basis, Australia’s Q1 Export Price Index and Import Price Index can entertain the pair traders.

Technical analysis

Unless providing a sustained break of the seven-week-old previous support line, around 0.6655 by the press time, the AUD/USD pair remains vulnerable of refreshing the yearly low, currently around 0.6565.