AUD/USD pullbacks towards 0.6920s after Fed Powell appearance at the US Senate

• The AUD/USD edges down, weighed by sour market sentiment, despite a soft US dollar.
• The US 10s-2s yield curve stays in positive territory but below the 1% threshold.
• Fed’s Powell acknowledged that the Fed could tip a recession in the US.
• AUD/USD Price Analysis: in the near term, it is downward biased and might print a fresh YTD low.

The AUD/USD snaps two days of gains and slides for the first time in the week, reaching a fresh weekly low at around 0.6881, though it achieved a comeback and settled around 0.6920s. At 0.6925, the AUD/USD is down 0.62% as the New York session ends.

Sentiment turns sour, risk-sensitive currencies fall

US equities could not hold to gains and recorded losses of around 0.15% on average, weighing on market sentiment. Likewise, the Federal Reserve’s aggressive tightening, further emphasized by Fed Chair Powell in the US Congress, and fears that the US central bank might get the US economy into a recession, put a lid on the AUD/USD and dragged the major down.

Jerome Powell, the Federal Reserve Chair, said that the Fed is strongly committed to bringing inflation down and added that the pace of tightening would depend on incoming data, alongside the US economic outlook. Also, and for the first time, he acknowledged that Fed actions could tip the US into a recession.

In the meantime, US Treasury yields would remain the primary focus for traders as they grasp the chances of a recession in the US. The US 10s-2s yield curve uptick and stays around 0.098%, after shifting to the recessionary territory around -0.08% in April 2022.

Elsewhere,  the US Dollar Index, a measure of the greenback’s value against its peers, remains heavy, falling 0.22%, at 104.196.

Data-wise, the Australian economic docket will reveal a pack of S&P Global PMIs indices. On the US front, the US calendar will feature Fed Chief Jerome Powell’s second day at the US Congress, Initial Jobless Claims, and S&P Global PMIs.

AUD/USD Price Analysis: Technical outlook

In the near term, the AUD/USD 4-hour chart depicts the pair as in a downtrend. Additionally, it faced solid resistance at the 50-simple moving average (SMA), which, in the last couple of days, being a dynamic resistance, kept AUD buyers contained from lifting exchange rates near the 0.7000 figure.

Therefore, the AUD/USD path of least resistance is downwards, and its first support would be 0.6900. Break below will expose the S1 daily pivot at 0.6880, followed by the S2 daily pivot point at 0.6840.