AUD/USD sinks below 0.6800 and retests the two-year-low on risk aversion

• The AUD/USD tumbled more than 100-pips during the day and probed the YTD low around 0.6763.
• The RBA hiked rates by 0.50%, but it wasn’t enough to overcome a dampened sentiment spurred by the stagflation economic outlook, so the AUD/USD dived.
• US-China tussles ease as US President Biden evaluates tariffs imposed by the Trump administration.

The Australian dollar followed its fellow peers and is tanking to fresh two-year-lows amidst renewed concerns of a recession looming worldwide, amidst a high inflation scenario, bolstering the appetite for safe-haven peers in the FX complex. At the time of writing, the AUD/USD is trading at 0.6767.

King dollar is back as risk appetite takes a hit on recession fears

The market mood remains dismal, as portrayed by European and US equities tumbling. The AUD/USD got a lift during the Asian session, printing the daily high at 0.6894, spurred by the Reserve Bank of Australia (RBA), hiking rates by 50 bps in back-to-back meetings. Nevertheless, the major began tumbling post-Euro area S&P Global PMIs releases, depicting a gloomy economic outlook in the EU block.

Regarding the RBA’s decision, the bank said that the size and timing of further interest rates would be guided by the incoming data and the Board’s assessment of the inflation outlook. The RBA noted that strong demand, a tight labor market, and capacity constraints in some sectors put upward pressure on prices while emphasizing that inflation is foreseen to peak later this year.

On the US front, US President Joe Biden is assessing removing tariffs imposed by the Trump presidency on some Chinese products as a solution to help the Federal Reserve to tackle inflation. However, it was outweighed by US recession fears, despite positive economic data released on Tuesday.

Data-wise, the US calendar showed that Durable Goods Orders and Factory Orders rose more than expected in May.

In the calendar ahead, the Australian docket will feature the RBA Chart Pack, while on the US front, ISM Non-Manufacturing PMIs, JOLTs Job Openings, and FOMC Minutes will be unveiled. Also, AUD/USD traders should take note of New York Fed President Williams on Wednesday.

AUD/USD Key Technical Levels