AUD/USD struggles for direction, consolidates above 0.7000 mark amid stronger USD

• AUD/USD lacked any firm direction and witnessed good two-way price moves on Wednesday.
• Aggressive Fed rate hike bets, a weaker risk tone underpinned the USD and acted as a headwind.
• Tuesday’s hawkish RBA meeting minutes extended support to the aussie and helped limit losses.

The AUD/USD pair seesawed between tepid gains/minor losses through the mid-European session and now seems to have stabilized in neutral territory, around the 0.7020 region.

Following an early uptick to a one-week high, the AUD/USD pair witnessed modest intraday pullback from the vicinity of mid-0.7000s on Wednesday amid the emergence of some US dollar dip-buying. Fed Chair Jerome Powell struck a more hawkish tone on Tuesday and said that he will back interest rate increases until prices start falling back toward a healthy level. The comments reaffirmed market bets for a more aggressive policy tightening by the Fed and assisted the USD to stall its recent sharp decline from a two-decade high.

Investors also remain worried that the Russia-Ukraine war and the latest COVID-19 lockdowns in China would hit the global economic growth. This was evident from a generally weaker tone around the equity markets, which further benefitted the safe-haven greenback and drove flows away from the perceived riskier aussie. Meanwhile, the Reserve Bank of Australia, in the minutes of its last meeting, signalled that a bigger interest rate hike is still possible in June, which, in turn, helped limit the losses for the AUD/USD pair.

Spot prices showed some resilience below the 0.7000 psychological mark. This, in turn, warrants some caution for bearish traders and before positioning for the resumption of the recent downfall witnessed 
over the past one month or so. Market participants now look forward to the US housing market data - Building Permits and Housing Starts. This, along with the US bond yields and the broader market risk sentiment, will influence the USD price dynamics and allow traders to grab short-term opportunities around the AUD/USD pair.

Technical levels to watch