AUD/USD tumbles to two-year lows below 0.6450 on risk-off impulse

• AUD/USD registers two-straight days of consecutive losses, down by 1,2% on Monday.
• Risk aversion sparked by central bank tightening and UK tax cuts shifted sentiment sour; consequently, the greenback is rising.
• Fed officials continue to emphasize that inflation is “too high.”

The AUD/USD is dropping almost 1%, due to a strong US Dollar, amidst flows seeking the safety of the greenback, which rises against most G8 currencies due to concerns that worldwide central banks tightening, could trigger a recession.

The AUD/USD began trading at around 0.6515 before hitting the day’s high at 0.6537. But as sentiment continued sour, the major fell toward a fresh two-year low at about 0.64426, breaking below the May 20, 2020 low of 0.6452. At the time of writing, the AUD/USD is trading at 0.6444 below its opening price.

AUD/USD stumble to fresh 2-year lows on a buoyant US dollar

Worldwide recession fears have augmented since the US Federal Reserve hiked rates by 75 bps last week. That said, alongside speculation that the UK’s economy keeps the Bank of England’s (BoE) under pressure, it sent the pound towards a fresh YTD low. At the same time, most G8 currencies followed suit, weakening against the already strong US dollar.

 A light US economic calendar revealed the Chicago National Activity Index for August, which decelerated to 0. In the meantime, some Fed speakers are crossing news wires.

On Sunday, Atlanta’s Fed President Raphael Bostic commented that he believes the Fed can bring inflation without substantial losses in the labor market, given the current economic slowdown. He reassures that inflation s “too high,” adding that the US central bank needs to do all it can to control it.

Earlier, the Boston Fed’s President Sussan Collins said that the unemployment rate needs to get higher for the Fed to achieve its inflation objective. Collins added that she would like “clear and convincing signs” that inflation is cooling while saying that “a significant economic or geopolitical event could push our economy into a recession as policy tightens further.”

Analysts at Westpac lowered the AUD/USD exchange rate target from 0.6900 to 0.6500. “That means that over the remainder of 2022, there will be periods when the AUD will trade below the USD0.65 level given the high volatility in currency markets to date.”

AUD/USD Key Technical Levels