AUD/USD bounces off one-week low, well offered around 0.6900 mark ahead of Powell

• AUD/USD witnessed heavy selling on Wednesday and dropped to a one-week low.
• The risk-off impulse was seen as a key factor weighing on the risk-sensitive aussie.
• Intraday USD pullback from highs helped limit losses ahead of Powell’s testimony.

The AUD/USD pair recovered a few pips from a one-week low touched earlier this Wednesday and was last seen trading just above the 0.6900 mark, still down around 0.85% for the day.

Doubts that major central banks could hike interest rates to curb soaring inflation without affecting the economic growth continued weighing on investors' sentiment. Adding to this, the global supply chain disruptions caused by the Russia-Ukraine war and the recent COVID-19 outbreak in China have been fueling fears about a potential recession. This, in turn, triggered a fresh wave of the risk-aversion trade and prompted fresh selling around the risk-sensitive Australian dollar.

The anti-risk flow was reinforced by a steep decline in the US Treasury bond yields, which failed to assist the US dollar to preserve its intraday gains. This, along with less hawkish remarks by Philadelphia Fed President Patrick Harker, dragged the USD to a fresh daily low during the early North American session. In an interview with Yahoo Finance Harker said that if demand softens quicker than expected, a 50 bps rate hike for July may be good.

The emergence of some USD selling offered support to the AUD/USD pair and led to modest bounce of around 30 pips from the 0.6880 area. Spot prices now seem to have stabilized around the 0.6900 round figure as the focus remains on Fed Chair Jerome Powell's testimony before the Senate Banking Committee. Investors will look for fresh clues about the Fed's policy tightening path, which will influence the USD price dynamics and provide a fresh impetus to the pair.

Technical levels to watch