AUD/USD drops back to 0.6800 as traders await FOMC Minutes amid recession fears

• AUD/USD fails to extend the rebound from 25-month low.
• Australia’s CBA, ANZ pass on full 50-bp home loan variable rate hike to defend home buyers.
• Economic slowdown fears underpin US dollar’s safe-haven demand, markets turn dicey ahead of the key data/events.
• RBA couldn’t impress bulls but Fed Minutes, US ISM Services PMI for June may favor bears.

AUD/USD retreats from intraday high as market players reassess the early Asian session’s corrective pullback amid the impending economic slowdown, as well as anxiety ahead of the key data/events. That said, the Aussie pair takes offers around 0.6795 while extending the pullback from an intraday high of 0.6820.

The Aussie pair’s latest weakness could be linked to the news from Australia suggesting the weakness in the housing market as top-tier bankers passed on the Reserve Bank of Australia’s (RBA) 50 basis points (bps) rate hike. That said, Commonwealth Bank of Australia and Australia and New Zealand Banking Group, Australia's No. 1 and No. 4 banks respectively, raised their home loan variable interest rates by 0.5% per annum from July 15, per Reuters.

The news also mentioned, “Australian lenders so far have been in lockstep with the central bank in passing the full rate hike to their customers, expecting to reap benefits at a time when the country's property market is showing signs of cooling after a bumper 22% price surge last year.”

Elsewhere, comments from Chinese Vice Foreign Minister Ma Zhaoxu, suggesting that China is willing to strengthen strategic coordination with Russia, also weighed on the AUD/USD prices due to the pair’s risk barometer status. The reason could be linked to the fears that Beijing’s support to Moscow could only escalate the Russia-Ukraine crisis and exert more downside pressure on the global supply chain, which in turn intensified the recession woes.

Additionally, hawkish bets on the major central banks’ next moves and upbeat US data also propel the risk-off mood, which in turn underpin the US dollar’s safe-haven demand and weigh on the AUD/USD prices. On Tuesday, the US Factory Orders for May, to 1.6% MoM versus 0.5% expected and upwardly revised 0.7% previous readings.

It should be noted that the US Treasury yields rebound from a five-week low marked the previous day, up by two basis points (bps) to 2.82% at the latest, whereas the S&P 500 Futures struggle for directions around 3,830 by the press time.

Given the recession fears and the RBA’s failure to please AUD/USD buyers, the quote is likely to remain pressured. However, today’s Federal Open Market Committee (FOMC) Minutes and the US ISM Services PMI for June will offer additional directions.

Technical analysis

Unless crossing the two-month-old previous support line, now resistance around 0.6865, AUD/USD stays on the way to the late 2019 lows around 0.6670.