Title: AUD/USD rebounds to near 0.6900 on dovish PBOC, Jackson Hole in focus

August 22, 2022 12:02 AM ET

By: AnalysisWatch

During the Asian session, the AUD/USD pair broke out of the consolidation formed in a narrow range of 0.6866-0.6883. The pair is attempting to break through the immediate 0.6900 barrier with confidence as the US Dollar Index (DXY) detects signals of exhaustion after printing a new monthly high of 108.29.

The asset has been under heavy bidding after the People's Bank of China (PBOC) cut its one-year and five-year prime interest rates (PLR) by 5 basis points (bps) and 15 bps, respectively. The PBOC expected the Chinese economy to face a slowdown in economic activity, particularly in the infrastructure, construction, and chemical industries. It should be noted that Australia is one of China's major trading partners. Therefore, a loose monetary policy by the PBOC strengthens the antipodes.

Confusion ahead of the Jackson Hole economic symposium has led to the exhaustion of the DXY rally. Fed policymakers are sending mixed messages as price pressures have eased and a slower pace of interest rate hikes is expected to avoid the consequences of a liquidity crunch. Conversely, the annual inflation rate of 8.5% is still quite far from the desired 2%. Therefore, clouds of uncertainty regarding Fed Chairman Jerome Powell's commentary at the Jackson Hole Economic Symposium will keep the asset volatile.

Looking ahead, investors await the release of U.S. durable goods orders, which are expected to decline 0.6% from the previous release of 2%. At a time when the U.S. economy has already posted an unchanged core consumer price index (CPI), a decline in economic data is not lucrative for DXY.