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Title: AUD/USD extends post RBA losses to 0.6950, teases weekly bullish channel breakdown

August 2, 2022 02:08 AM ET

By: AnalysisWatch

AUD/USD bears ignore the Reserve Bank of Australia (RBA) rate decision and extend the pullback from the one-month high ahead of Tuesday's European session. Still, the Aussie pair is taking offers to refresh its daily low at 0.6950 by press time.

The RBA met market expectations by announcing a 50 basis point (bps) rate hike, the fourth in 2022, while also raising the policy rate to 1.85%. However, the RBA's statement, which said that the central bank had not taken a predetermined path in normalizing interest rates, seemed to attract AUD/USD bears.

On the other hand, discussions about the US-China dispute related to US House of Representatives Secretary Nancy Pelosi's visit to Taiwan and the likely difficulties for Chinese chipmakers seem to be weighing on market sentiment and AUD/USD prices. In the same vein, the dragon nation's readiness for a military exercise in the Bohai region of the South China Sea could also be weighed. In addition, headlines suggesting that Chinese policymakers lack confidence in this year's gross domestic product (GDP) forecasts also added to the risk-off sentiment, sending the price lower.

Fears of an economic slowdown are underpinned by the latest purchasing managers' indices from the U.S. and Europe, which in turn clouds market sentiment and favors AUD/USD sellers. Indirect signals from Fed Chairman Jerome Powell that the hawks are running out of steam could also weigh on sentiment.

Asia-Pacific equities and U.S. equity futures weighed on sentiment with losses. However, the coupon on 10-year U.S. bonds fell 5.5 basis points (bp) to 2.55%, challenging the bears on weakness in the U.S. dollar. Still, the U.S. Dollar Index (DXY) bounced off its one-month low before bouncing off 105.00.

Ahead of Friday's upcoming RBA interest rate statement and July U.S. jobs data, Fed speakers and China headlines may entertain AUD/USD traders.

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