AUD/USD below 0.7600, weighed from fresh highs by strong US dollar

• AUD/USD bulls are back below 0.76 but remain on firm territory. 
• Hawkish RBA lifted AUD to break weekly resistance. 

AUD/USD is starting out the day on Wednesday in bullish territory around 0.7580 but well below the post-Reserve Bank of Australia rally highs of 0.7661. The market’s perception that the RBA could be hiking rates in the not too distant future has underpinned the Aussie and raised prospects of higher grounds towards the 0.7800 area.

''In the wake of the policy statement, wires are reporting that economists are starting to focus on the June RBA meeting as a possible date for lift-off in rates. The pace of policy tightening will depend on economic data,'' analysts at Rabobank explained. 

The RBA has kept rates steady at 0.10% but it has tweaked its forward guidance. Analysts at Brown Brothers Harriman explained, ''the bank dropped its reference to remaining “patient” on policy and instead moved to being data-dependent.'' 

''This shift would seem to validate market expectations for liftoff coming sooner rather than later. As such, RBA tightening expectations continue to rise.''

Nevertheless, the US dollar and yields were taking the spotlight on Tuesday following comments from Federal Reserve Governor Lael Brainard. She spooked investors about potential aggressive actions by the Fed and in anticipation of hawkish minutes tomorrow. Brainard said the central bank could start reducing its balance sheet as soon as May and would be doing so at “a rapid pace.” She also indicated that interest rate hikes could come at a more aggressive pace than the typical increments of 0.25 percentage points.

US Treasury yields climbed to multi-year highs with yields taking off after her hawkish comments and U-turn. The DXY, an index that measures the greenback vs a basket of currencies, ran up to test 99.50 to print a fresh high for 2022 at 99.493. 

Meanwhile, the Fed officials began the process of policy normalization by lifting rates 25bp to 0.25%-0.50% at the March meeting and on Wednesday the minutes of that meeting will be released.

''The FOMC pull no hawkish punches in its policy guidance, with Chair Powell also hinting further information about QT plans will be provided in the minutes (possibly including caps details). We continue to expect an official QT announcement at the May FOMC meeting,'' analysts at TD Securities said.