AUD/USD slides below 0.6900 as RBA talks fail to overcome hawkish Fed bets

• AUD/USD holds lower ground near the six-week bottom, prints three-day downtrend.
• RBA’s Lowe, Elis fail to renew hawkish bias despite signaling higher rates, inflation fear.
• Strong US data propels US Treasury bond yields and the US Dollar to weigh on Aussie price.
• Risk catalysts are important for fresh impulse amid light calendar.

AUD/USD takes offers to refresh intraday bottom around 0.6870 as it prints a three-day losing streak following a failed recovery from the six-week low. In doing so, the Aussie pair takes clues from the hawkish Fed bets while hesitating in praising Reserve Bank of Australia (RBA) Governor Philip Lowe’s readiness for higher rates. It’s worth noting that the job market fears signaled by RBA Assistant Governor (Economic) Luci Ellis exert additional downside pressure on the Aussie pair.

“High inflation is damaging and corrosive,” said Reserve Bank of Australia (RBA) Governor Philip Lowe in his Testimony to the House Economics Committee early Friday in Asia. The policymaker also stated, “We are not done yet on rates”.

Following that, RBA’s Ellis said that the labor market is a little less tight than a few months ago. “Exceptionally huge number of people are awaiting new jobs,” added RBA’s Ellis.

On a different page, Federal Reserve (Fed) officials were quite hawkish and backed by the strong US data to propel the US Dollar, as well as weigh on the AUD/USD price.  Among them, St. Louis Federal Reserve's James Bullard and Cleveland Fed President Loretta Mester were the latest to bolster the greenback.

The Fed hawk Bullard said, “Continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets, by keeping inflation expectations low.” Fed’s Mester, on the same line, stated that the Fed will need to go above 5% and stay there for a while. The policymaker also added that she is not ready to say if the Fed needs a bigger rate increase at the next policy meeting but said that she would not want to surprise the markets.

US data have recently pushed back the calls for the Federal Reserve’s (Fed) policy pivot. That said, the latest FEDWATCH read from Reuters signals that the interest rate futures market shows US rates could peak close to 5.25% by July before dropping to 5.0% by the end of the year.

Out of the latest US statistics, Producer Price Index (PPI) for January gained major attention as it jumped the most since June with 0.7% MoM figure. Also positive was the improvement in the US Initial Jobless Claims for the week ended on February 10, 194K versus 200K expected and 195K prior. Alternatively, a slump in the Housing Starts for January and the Philadelphia Fed Manufacturing Survey for February seemed to have gained a little attention.

Elsewhere, US President Joe Biden fired shots at his Chinese counterpart while conveying the expectations for a talk with the Chinese leader, during an interview with NBC News. “I think the last thing that Xi wants is to fundamentally rip the relationship with the United States and with me," said US President Biden per Reuters. The same weighs on the market sentiment and the AUD/USD price.

Amid these plays, Wall Street closed negative and the S&P 500 Futures dropped 0.30% intraday by the press time. It should be noted that the US 10-year Treasury bond yields rose to the highest levels in 2023 with the latest print of 3.86% while its two-year counterpart also printed mild gains to end the day around 4.64%, making rounds to the highest levels since November 2022. With this, the US Dollar Index (DXY) refreshed a six-week high around 104.23 before retreating to 104.03 by Thursday’s end.

Moving on, a lack of major data/events joins the risk-off mood and hawkish Fed bets to keep the AUD/USD bears hopeful.

Technical analysis

A daily closing below the 50-DMA, around 0.6885 by the press time, directs AUD/USD price towards the 200-DMA key support surrounding the 0.6800 round figure, backed by bearish MACD signals and an absence of oversold RSI (14).