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Title: AUD/USD eyes a break below 0.6950 as DXY rebounds ahead of Fed’s Powell

August 26, 2022 12:53 AM ET

By: AnalysisWatch

The AUD/USD pair saw selling pressure after facing barricades around 0.6970 during the Asian session. The asset is expected to post further losses as the U.S. Dollar Index (DXY) is expected to see significant bids. Investors should continue to support the greenback as the likelihood of a hawkish comment on interest rates from Federal Reserve (Fed) Chairman Jerome Powell increases sharply.

Mixed reactions from market veterans to the Fed's next interest rate action have kept the DXY on edge in recent trading sessions. The responses have varied: either the Fed should stick to its trajectory of raising interest rates at a steady pace, or it should slow down due to the consequences of tightening liquidity in the market.

However, Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr's commentary at the Jackson Hole Economic Symposium provided some clarity. According to Mr. Orr of the RBNZ, their respective central banks will announce at least two interest rates to protect the economy from price pressures, with their top priority being to preserve retail demand. And, in executing that, economic activity will have to withstand the downturn. And now, a similar comment is expected from the Fed's Powell.

On the Australian front, investors are still reeling from the PMI data released on Tuesday. The Chinese economy announced the injection of one trillion Chinese yuan (CNY) into its economy, which could also boost the Australian export market outside of Chinese economic activities. It is worth noting that Australia is one of China's major trading partners, and the growth prospects in China significantly accelerate Australian exports.

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