AUD/USD slides to 2-1/2 week lows, eyeing 0.6900 handle ahead of Powell/FOMC minutes
- Fading US-China trade optimism continues to weigh on the China-proxy Australian Dollar.
- Tempered Fed rate cut expectations underpin the USD and added to the bearish pressure.
- Wednesday’s key focus will remain on Powell’s testimony and June FOMC meeting minutes.
The AUD/USD pair remained depressed through the Asian session on Wednesday and is currently placed at 2-1/2 week lows, around the 0.6920-15 region.
The pair extended last week's sharp pullback from near two-month tops, around mid-0.7000s, with a combination of negative factors exerting downward pressure for the fifth consecutive session on Wednesday.
The US Dollar remained well supported by the fact that investors continued scaling back expectations for an aggressive policy easing by the Fed, reinforced by the recent rebound in the US Treasury bond yields.
In absence of any fresh update on the US-China trade talks, the China-proxy Australian Dollar was further weighed down by softer Chinese inflation figures - PPI and CPI, released earlier this Wednesday.
In fact, China's producer price inflation for June missed consensus estimates by a big margin and remained flat on a yearly basis, down significantly from the 0.6% rise seen in the previous month.
It would now be interesting to see if the pair is able to find support at lower levels or the slide marks the resumption of the prior bearish trend as the focus now shifts to the Fed Chair Jerome Powell's congressional testimony.
This will be followed by the release of the minutes of the June FOMC meeting, which might provide some clues over the central bank's near-term monetary policy outlook and provide a fresh directional impetus for the major.
Technical levels to watch