AUD/USD nears key support as Fed rate hike speculations turn sentiment sour

• AUD/USD takes a hit, dropping 0.40% and struggling to hold the 0.6500 level as Federal Reserve officials hint at no end to rate hikes.
• U.S. Treasury yields fall, yet the Dollar rebounds from two-month lows, signaling a cautious market as traders eye Fed Chair Powell's upcoming speech.
• Despite RBA's rate hik and hawkish outlook, the Aussie Dollar fails to rally, with the market anticipating the end of RBA's tightening cycle ahead of the SoMP release.

The AUD/USD continues to drop further toward the 50-day moving average (DMA) after failing to crack the 0.6500 figure on Tuesday, which exacerbated the pair´s drop, as it trades at 0.6410, losses 0.40%, past the mid-North American session.

Australian Dollar retreats to 0.6410, flirting with the 50-day moving average amid hawkish Fed rhetoric and RBA's rate hike

Risk appetite is taking its toll following Federal Reserve’s officials' remarks, pushing back against the idea of cutting interest rates, led by Minnesota Fed President Neil Kashkari, who questioned whether the Fed had raised rates enough due to the economy’s resilience while adding that an uptick in inflation would trigger another rate hike by the Fed. Some of his comments were echoed by Michelle Bowman, who said further rate hikes are needed.

Against this backdrop, US Treasury bond yields continued to drop, while the Greenback enjoyed a bounce from two-month lows of 104.84 to 105.51 in the last three days of trading.

On the Australian front, the Reserve Bank of Australia (RBA) lifted rates 25 bps, and despite delivering a hawkish statement, as they assume inflation would likely remain high for a longer period, market participants estimate the RBA ended its tightening cycle.

After the RBA’s meeting, the AUD/USD has been on the defensive, falling more than 1.45%, erasing close to a 100-pips of the gains accumulated last week.

Given the fundamental backdrop, AUD/USD traders would look out for clues on the Federal Reserve Chairman Jerome Powell's speech on Thursday. On the Aussie’s front, the RBA would reveal its Statement of Monetary Policy (SoMP) after Powell’s remarks.

AUD/USD Technical Levels