AUD/USD stays on the way to 0.7000 amid risk-on mood, softer USD, Fed’s Powell eyed

• AUD/USD seesaws above 0.6950 after two-day rebound, paring Friday’s heavy losses.
• Market sentiment improves amid softer US data, pre-Powell consolidation and Biden’s optimism.
• RBA Minutes, Lowe’s speech added strength to the upside momentum, hawkish Fedspeak fails to propel USD.
• Australia’s Westpac Leading Index may entertain traders, Fed Chair Powell’s testimony is the key catalyst.

AUD/USD dribbles around 0.6970, after paring Friday’s heavy losses in the last two days, as buyers turn cautious ahead of Fed Chair Jerome Powell’s Testimony. However, receding fears of recession and an absence of major negatives, as well as the Reserve Bank of Australia’s (RBA) hawkish bias, keeps the Aussie bulls hopeful during the early hours of Wednesday’s Asian session.

US President Joe Biden’s firm rejection of the recession fears seems to gain the market’s acceptance and underpin the firmer sentiment amid a lack of major negatives as the US traders began the trading week. Following Biden’s comments, his Economic Aide Heather Boushey also conveyed hopes of avoiding the recession. It’s worth noting that US President Biden’s readiness for the gas tax holiday and softer US data also underpinned the positive mood.

On the same line were the recent comments from US Treasury Secretary Janet Yellen who said that the traditional recession measure of two consecutive quarters of negative growth 'has typically worked' but recessions aren't all alike.

That said, the US Existing Home Sales dropped to the lowest levels in two years when talking about the annualized number. Further, the Chicago Fed National Activity Index also dropped to 0.01 in May versus a revised down 0.04 prior.

At home, the RBA Minutes and Governor Philip Lowe both teased higher rates moving forward, while also suggesting the economic strength to avoid the pessimism.

Elsewhere, Richmond Federal Reserve President Thomas Barkin said on Tuesday that there will be no rapid return for the U.S. economy to the experience of the previous decade of stable growth, jobs and inflation, Reuters reported. The policymaker also favored higher rates.

Amid these plays, Wall Street posted the notable gains after the biggest weekly loss in years while the US 10-year Treasury yields also rose to 3.27% at the latest.

Moving on, Australia’s Westpac Leading Index for May, prior -0.15%, can offer immediate directions to the AUD/USD pair. However, major attention will be given to Fed Chair Jerome Powell’s Testimony.

Read: S&P 500 bounces back from oversold, but what’s around the corner?

Technical analysis

AUD/USD grinds inside a 40-pip trading area above 0.6940 comprising the weekly support line and the 10-DMA.