AUD/USD stays below 0.7000 as RBA’s Lowe fails to copy hawkish Fed signals

• AUD/USD remains depressed at intraday low, snaps two-day winning streak.
• RBA Governor Lowe’s Testimony before Senate Economics Legislation Committee appears less hawkish.
• Fed policymakers defend rate hike bias despite unimpressive US inflation.
• US data, risk catalysts eyed for intermediate directions ahead of Thursday’s Aussie jobs report.

AUD/USD holds lower ground near 0.6980 after Reserve Bank of Australia (RBA) Governor Philip Lowe’s Testimony during the mid-Asian session on Wednesday. In doing so, the Aussie pair appears to give more weight to the hawkish Fed signals and the market’s offbeat mood ahead of the key data/events from the US and Australia.

In his testimony before the Senate Economics Legislation Committee, RBA Governor Lowe said, “Inflation is way too high,” and that it needs to come down. The policymaker, however, also stated that the government fiscal policy is broadly neutral, which in turn suggests the need for other efforts to tame inflation than the rate hikes. The same seemed to have favored the Aussie bears in keeping the reins around the daily low.

Also read: RBA Lowe: Inflation is way too high, needs to come down

It should be noted that Lowe’s comments weren’t as impressive as the Federal Reserve (Fed) officials’ defense to the higher rates, despite the softer US Consumer Price Index (CPI). As a result, the AUD/USD pair returns to the bear’s radar after a two-day absence.

That said, most of the Federal Reserve (Fed) policymakers were in favor of further rate hikes even as the United States inflation failed to match “positive surprise” hopes. The same propelled the US Treasury bond yields and US Dollar.

US 10-year Treasury bond yields seesaw around 3.75%, up three basis points (bps) after refreshing a six-week high whereas the two-year counterpart jumped to the highest level since early November 2022 by poking 4.62%. The same joined day-end losses of Wall Street, as well as mildly offered S&P 500 Futures, to underpin the US Dollar Index (DXY) rebound.

Given the risk-off mood and the firmer US Treasury bond yields, as well as the hawkish Fed bets, the AUD/USD bears are likely to remain in the driver’s seat. However, today’s US Retail Sales and Industrial Production details for January, as well as NY Empire State Manufacturing Index for February, should be watched for intraday clues. Above all, Thursday’s Aussie employment data eyed for clear directions.

Technical analysis

A clear downside break of the 50-DMA support, around 0.6885 at the latest, becomes necessary for the AUD/USD bears to keep the reins.