AUD/USD refreshes weekly low, bears now await break below 0.6900 amid stronger USD

• AUD/USD met with a fresh supply on Wednesday and dropped back closer to the 0.6900 mark.
• Fed rate hike bets, the risk-off mood boosted the USD and weighed on the risk-sensitive aussie.
• The market focus remains glued to Fed Chair Jerome Powell’s two-day congressional testimony.

The AUD/USD pair came under some renewed selling pressure on Wednesday and dropped to a fresh weekly low, around the 0.6910-0.6905 region during the early European session. The downfall comes on the back of repeated failures ahead of the 0.7000 psychological mark over the past two trading days and favours bearish traders amid the emergence of fresh US dollar buying.

Firming expectations that the Federal Reserve would retain its aggressive policy tightening stance to curb soaring inflation turned out to be a key factor that continued lending support to the USD. In fact, the markets are pricing in another 75 bps rate hike at the next FOMC meeting in July and the bets were reaffirmed by Fed Governor Christopher Waller's comments on Sunday.

Investors also seem worried that a more aggressive move by major central banks to combat stubbornly high inflation would pose challenges to global economic growth. This, in turn, took its toll on the risk sentiment, which was evident from a fresh leg down in the equity markets. The anti-risk flow further benefitted the safe-haven buck and weighed on the risk-sensitive aussie.

With the latest leg down, the AUD/USD pair has erased its modest weekly gains. Some follow-through selling, leading to a subsequent break through the 0.6900 mark, would be seen as a fresh trigger for bearish traders. This would pave the way for a further near-term depreciating move and drag spot prices back towards challenging the monthly low, around mid-0.6800s.

Market participants now turn their focus to Fed Chair Jerome Powell's semi-annual testimony before the Senate Banking Committee, due later during the North American session. Traders will take cues from the US bond yields and the broader market risk sentiment. The combination of factors would drive the USD demand and provide a fresh trading impetus to the AUD/USD pair.

Technical levels to watch