AUD/USD pares weekly losses around 0.6800 as markets brace for Fed Chair Powell’s testimony

• AUD/USD picks up bids to refresh intraday high while bouncing off one-week low.
• Aussie pair consolidates three-day losses amid mixed clues, cautious markets.
• Bears fail to justify hawkish RBA Minutes amid mixed comments from Bullock, PBoC rate cut.
• Upbeat US housing data, Fed talks favored US Dollar ahead of latest retreat amid pre-event positioning, Powell’s testimony eyed.

AUD/USD stays mildly bid around 0.6790 as it prints the first daily gains in four while bouncing off the one-week low marked the previous day. That said, the Aussie pair’s recovery during early Wednesday’s Asian session could be linked to the market’s preparations for this week’s key event, namely the bi-annual testimony of Fed Chair Jerome Powell.

It’s worth noting that the market sentiment remains dicey and allows the risk-barometer AUD/USD pair to lick its wounds near the lowest levels in a week despite the hawkish Fed signals and the risk-negatives headlines surrounding China. Additionally important to note is the hawkish Minutes of the Reserve Bank of Australia (RBA) versus the People’s Bank of China’s (PBoC) rate cut and cautious remarks of RBA Assistant Governor Michele Bullock.

Recently, the news that US President Joe Biden on Tuesday called Chinese President Xi Jinping a dictator prod the AUD/USD pair’s recovery moves near the intraday high. The comments flags grim concerns surrounding the US-China ties after US Secretary of State Antony Blinken’s visit to Beijing failed to provide any major positives. The same should keep the Aussie pair sellers hopeful.

On the same line line, downbeat prints of Australia’s Westpac Leading Index for May, to -0.27% versus -0.03% prior, also keeps the AUD/USD bears hopeful.

On the previous day, RBA Minutes defend the consecutive second hawkish surprise by terming it a trick to boost confidence that inflation will return to normal sooner. However, RBA Deputy Governor Michele Bullock said that the higher rates are the only tool the RBA has to curb inflation. The policymaker added that the employment and economy need to grow below trend for a while.

It should be noted that sentiment soured after the People's Bank of China (PBoC) cut two key lending rates (Loan Prime Rate (LPR) and Medium-term Landing Facility (MLF) rate for the first time in almost a year.

Additionally, hawkish comments from the Fed Officials and upbeat US data. On Tuesday, Fed governor and Vice Chair Nominee Philip Jefferson said, “I remain focused on returning it to our 2% target.” On the same line, Federal Reserve Governor Lisa Cook said "I am committed to promoting sustained economic growth in a context of low and stable inflation," in her statement to be given before the Senate on Wednesday. Further, Fed Board nominee Adriana Kugler also mentioned, per the prepared statements for Wednesday’s Testimony, that returning inflation to the central bank's 2% target is key to setting a strong foundation for the US economy.

That said, US Housing Starts jumped to the highest level since April 2022 by rising 21.7% MoM in May versus -2.9% (revised from +2.2%) recorded in April and -0.8% market forecasts. On the same line, Building Permits were also upbeat for the said month, up 5.2% MoM versus -5.0% expected and -1.4% previous readings (revised from -1.5%).

While portraying the mood, the Wall Street benchmark began the week on the negative side while the US Treasury bond yields also snapped a two-day winning streak.

Moving on, AUD/USD remains pressured despite the latest corrective bounce as market players aim for Fed Chair Jerome Powell’s bi-annual testimony.

Technical analysis

Although the 200-day Exponential Moving Average (EMA) restricts the AUD/USD pair’s immediate downside around 0.6760, the pair’s recovery remains elusive unless crossing the previous support line stretched from May 31, close to 0.6935 by the press time. That said, the monthly peak of near 0.6900 acts as a nearby upside hurdle for the bulls to watch.