AUD/USD continues its two-day slump pierces 0.7160

• The Australian dollar falls at the mercy of a hawkish US central bank that eyes reducing its balance sheet.
• US Initial Jobless Claims rose more than foreseen but remain at five-decade lows.
• AUD/USD Technical Outlook: The pair is bearish biased and soon might test the 0.7100.

In the North America session, the AUD/USD slides for the second day of the week, courtesy by a hawkish Federal Reserve alongside a rise in US Treasury yields, with the 10-year benchmark note above 1.70%, the highest since April 2021. At the time of writing, exchanges hands at 0.7161.

US Initial Jobless Claims increased more than estimated

In the meantime, US Initial Jobless Claims for the week ending on January 1, 2022, rose by 207,000 more than the 197,000 estimated by economists. The 10,000 increase of claims on the first week of the year impacted the 4-week average, which topped 204,500, higher than the 199,750 in the prior week. Despite rising, jobless claims hovered near a five-decade low in recent weeks.

Next on the US calendar, the ISM Services PMI for December, estimated at 66.9, would be released at 15:00 GMT, while St. Louis Fed President James Bullard (voter 2022) would cross the wires later in the day.

That said, on Wednesday, the US central bank revealed on its December minutes that monetary policy accommodation was not needed and that a faster reduction of its QE program was required before hiking rates. Also, Fed policymakers began discussions of a contraction of its balance sheet, which was perceived by a hawkish signal by the markets, with investors selling stocks aggressively. At the same time, US T-bond yields rose, with the 10-year hitting the highest level since April 2021.

Furthermore, US money market futures have priced in an 80% chance of a rate hike in the March 2022 meeting. In the meantime, the US Dollar Index, which measures the buck's value against six rivals, is barely flat at 96.16.

AUD/USD Price Forecast: Technical outlook

The AUD/USD daily chart depicts the pair as bearish biased, as the daily moving averages (DMAs) reside above the spot price, with a downslope acting as dynamic resistance levels. Additionally, at press time, the pair pierced an upslope trendline drawn from December 6, 2021, daily low up to December 20, 2021, low, that opened the door for a test of the latter at 0.7082, but it would find some hurdles on its way down.

The AUD/USD first support level would be the 0.7100 psychological level. A breach of the latter would send the pair tumbling towards the December 20, 2021, cycle low at 0.7082.