AUD/USD approaches 0.6800 supported by China’s stimulus, focus shifts to Fed

• AUD/USD is marching towards 0.6800 as investors have digested the hawkish interest rate policy on Wednesday.
• Strength in the USD Index is coming from anxiety among market participants ahead of the interest rate decision by the Fed.
• The Australian Dollar has got strength after the announcement of stimulus in China.

The AUD/USD pair has sensed mild selling pressure after printing a fresh day high at 0.6778 in the European session. The Aussie asset is broadly approaching the round-level resistance of 0.6800 as headlines of fresh stimulus announcement in China has infused optimism in antipodean.

S&P500 futures have added some gains in the London session, portraying further recovery in the risk appetite of the market participants. US equities found decent demand on Monday as investors are clear that the Federal Reserve (Fed) will raise interest rates further by 25 basis points (bps) to 5.25-5.50%.

The US Dollar Index (DXY) has climbed above the immediate resistance of 101.40 and is looking for fresh bids for further upside. Strength in the USD Index is coming from anxiety among market participants ahead of the interest rate decision by the Fed. The Fed is expected to raise interest rates further but the factor that is making investors uneasy is the guidance to be delivered by Fed Chair Jerome Powell.

Investors will focus on whether Jerome Powell would reiterate the need for one more interest rate hike after July’s interest-rate policy. The economic indicator that could propel Jerome Powell to deliver hawkish guidance is the tight labor market conditions.

Meanwhile, the Australian Dollar has got strength after the announcement of stimulus in China. State news agency Xinhua cited the Politburo - the top decision-making body of the ruling Communist Party - saying that China will step up economic policy adjustments, focusing on expanding domestic demand, boosting confidence, and preventing risks.

It is worth noting that Australia is the leading trading partner of China and stimulus support in China would strengthen the Australian Dollar.