AUD/USD flirts with monthly low above 0.6900 amid hawkish Fed bets, China’s covid woes

• AUD/USD bears take a breather after the biggest daily fall in five weeks.
• Growing chatters over Fed’s 75 bp rate hike, China’s covid woes drowned riskier assets.
• DXY, Treasury yields cheered safe-haven demand by refreshing multi-year top.
• Australian markets will begin the week with housing, NAB sentiment data but risk catalysts are the key to fresh impulse.

AUD/USD licks its wounds near the recently flashed monthly low surrounding 0.6900, following the heaviest daily fall in five weeks, as Aussie traders return to the table after Monday’s holiday. That said, the quote seesaws near 0.6920-30 after refreshing the monthly low with 0.6910 the previous day.

Growing fears of the Fed’s aggression joined worsening covid conditions in China to underpin the latest risk-aversion wave. Also contributing to the AUD/USD pair’s weakness could be a light Aussie calendar due to the Queen’s Birthday.

Friday’s US inflation data propelled calls for faster/heavier rate increases and spread the market fears as hawkish central bank actions tease recession woes. The same pushed multiple analysts ranging from JP Morgan to Goldman Sachs to revise their Fed forecasts and include expectations of a 75 bp rate hike in June and July. “Our Fed forecast is being revised to include 75bps hikes in June and July,” said Goldman Sachs in its latest Fed forecasts per Reuters.

On the other hand, a fresh spike in China’s covid cases during the weekend again pushed Beijing and Shanghai towards the return of the activity restrictions. Given the dragon nation’s strong trading ties with Australia, coupled with the status of the world’s biggest industrial player, fears of China’s economic hardships weigh on the riskier assets like equities, commodities and Antipodeans.

Against this backdrop, the Wall Street benchmarks slumped to the yearly low marked in January while the US 10-year Treasury yields rose to the highest since May 2011, around 3.36% by the press time.

Considering the full steam risk-off mood, the AUD/USD prices are likely to witness further downside. However, the quarterly readings of Australia’s House Price Index for Q1, expected 1.4% versus 4.7% prior, will precede National Australia Bank’s Business Conditions and Business Confidence figures for May to direct intraday moves.

Technical analysis

A clear downside break of January’s low surrounding 0.6965 directs AUD/USD towards a yearly low of 0.6828.