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In a Cautious Market, AUD/USD Continues Losses Towards Critical Support Around 0.6855

June 23, 2022

Talking Points: 

  • After an early comeback to close at 0.6930 the AUD/USD pair is in decline.
  • Fears of a recession increase demand for the USD as a safe haven as Powell falls short.
  • A test of the crucial support at 0.6855 is at risk due to the daily technical setup.

After failing to maintain the modest rally in the 0.6930 zone, the AUD/USD is currently trading around 0.6900. As traders continue to worry about the possibility of a worldwide recession, the USD is experiencing new demand for the resumption of risk-off flows during today’s Asian trading session.

The market thought that the aggressive Fed’s tightening stance could push the US economy into a recession after Fed Chair Jerome Powell confirmed the central bank’s commitment to fighting inflation. Furthermore, the continuing conflict in Ukraine and China’s economic restrictions are expected to keep the pressure on inflation high, which would force central bankers throughout the world to take decisive action to counteract it.

Bulls are unable to profit from the belief that the Reserve Bank of Australia (RBA) will implement larger and faster rate increases when there is a bleak outlook for the world economy. Once again, attention is focused on Powell’s second day of briefing in order to glean more insight into the rate hike timeline. We’ll also pay special attention to the U.S. Purchasing Managers Index (PMI) reports.

Technically speaking, the AUDUSD is moving back towards the bottom of the previous day around 0.6880, which if sustained will open the doors towards the rising trendline support at 0.6855.

It is possible that there will be a rapid decline below the latter, with bears aiming for the 12th of May’s low of 0.6828.

The downside bias is supported by the 14-day Relative Strength Index (RSI), which is pointing south below the midline.

AUD/USD Daily Chart:

 

Alternatively, for any meaningful rebound towards the psychological level of 0.6950, AUD bulls need to break through the daily high of 0.6929.

The 0.7000 supply zone will once again come into focus with a daily close above the aforementioned resistance.

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