AUD/USD holds steady ahead of Powell’s speech, as technicals suggest further downside

• AUD/USD gained 0.19% on Monday, with a slight dip in Tuesday’s session, trading at 0.6410.
• China’s PboC rate cut and urging for increased loans signal efforts to bolster the slowing economy.
• Jerome Powell’s upcoming speech could influence the pair’s trajectory, with a dovish tone potentially favoring AUD/USD.
• Technicals hint at a potential upside, with key resistance levels at 0.6429, 0.6500, and 0.6550 in focus.

AUD/USD registered minuscule losses on Tuesday but finished Monday’s session on the green, gained 0.19% but remained within familiar levels as traders await the US Federal Reserve Chair Jerome Powell’s speech. The AUD/USD is trading at 0.6410, down 0.05%, as Tuesday’s Asian session begins.

Risk appetite sees a boost from China's rate cut, but traders remain cautious as they await insights from the Fed Chair

Risk appetite improvement bolstered the Australian Dollar (AUD) against the US Dollar (USD). Monday’s Asian session developments, like the People’s Bank of China (PboC) slashing its one-year Loan Prime Rate (LPR) from 3.55% to 3.45%, amidst an ongoing economic slowdown. In fact, central bank officials and government regulators suggested that Chinese banks will need to boost loans to support China’s recovery.

In the meantime, global bond yields advanced, with the 10-year  US Treasury bond yields climbing to a new six-year high, as investors position themselves ahead of the August 25 Jerome Powell speech, widely expected by market players. Analysts expect Powell to reinforce the Fed’s commitment to tame inflation while keeping all his options open regarding monetary policy. Nevertheless, if he strikes a dovish tone, that would pave the way for further AUD/USD upside in the back of a softer US Dollar, as Australia’s finished its hiking cycle.

Interest rates expectations

Money market futures see the Reserve Bank of Australia (RBA) keeping rates unchanged, though there’s a 15 basis point repricing for March 2024. On the Federal Reserve front, traders priced in 11 basis points of interest rate increases for November’s monetary policy meeting.

Upcoming economic data would help AUD/USD traders assess economic conditions in both countries. The Australian economic agenda would feature PMIs, alongside Building Permits and Inflation for July. Upticks on inflation would open the door for a possible rate hike. On the US front, the docket would feature Existing Home Sales, Fed speakers, New Home Sales, S&P Global PMIs, Jobless Claims, Durable Good Orders, and Fed Chair Jerome Powell’s speech on Friday.

AUD/USD Price Analysis: Technical outlook

After forming a double top, the AUD/USD has extended its losses, though back-to-back bullish harami candlestick patterns could pave the way for further upside. If AUD/USD buyers reclaim the August 18 daily high of 0.6429, the 0.6500 figure is followed by the 0.6550 psychological level and the 0.6600 mark.

AUD/USD Price Action – Daily chart