AUD/USD keeps the red below 0.7500 mark, seems vulnerable near weekly low

• AUD/USD added to the previous day’s heavy losses and dropped to a fresh weekly low.
• The Fed’s hawkish outlook, a softer risk tone underpinned the USD and exerted pressure.
• Retreating US bond yields capped the upside for the USD and helped limit deeper losses.

The AUD/USD pair maintained its offered tone through the first half of the European session and was last seen hovering near the weekly low, around the 0.7475 region.

The pair witnessed some follow-through selling for the second successive day on Thursday and extended this week's sharp retracement slide from the highest level since June 2021, around the 0.7660 area. The US dollar stood tall near a two-year high touched on Tuesday amid the Fed's hawkish outlook, which, in turn, was seen as a key factor that exerted downward pressure on the AUD/USD pair.

In fact, the minutes from the March 15-16 FOMC meeting released on Wednesday showed that policymakers were prepared to hike interest rates by 50 bps amid concerns that inflation had broadened through the economy. The minutes also showed general agreement over the need to reduce the central bank’s massive balance sheet at a maximum pace of $95 billion per month to tighten financial conditions.

The Fed's aggressive plans, along with fading hopes for a diplomatic solution to end the war in Ukraine, weighed on investors' sentiment. This was evident from a fresh leg down in the equity markets, which further benefitted the safe-haven buck and drove flows away from the perceived riskier Australian dollar. That said, retreating US Treasury bond yields capped the upside for the greenback.

Apart from this, a hawkish commentary by the Reserve Bank of Australia, along with rising commodity prices, helped limit deeper losses for the resources-linked aussie, at least for now. It is worth recalling that the RBA dropped its pledge to be patient on tightening policy and noted that the domestic economy remains resilient, and spending is picking up following the omicron setback.  

Nevertheless, acceptance below the 0.7500 psychological mark favours suggests that the AUD/USD pair has topped out in the near-term and supports prospects for an extension of the corrective slide. Traders now look forward to the US Weekly Initial Jobless Claims data, which, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the AUD/USD pair.

Technical levels to watch