Powell said there is risk the Fed's effort to tame persistently high inflation with interest rate hikes will slow the American economy too much.
The Australian Dollar is under pressure against the U.S. Dollar late in the session on Wednesday as the prospects of a global economic slowdown weighed on investor sentiment.
Fueling the sell-off in the Aussie were comments from Federal Reserve Chair Jerome Powell. He said there is risk the U.S. central bank’s effort to tame persistently high inflation with interest rate hikes will slow the American economy too much.
At 19:09 GMT, the AUD/USD is trading .6875, down 0.0030 or -0.44%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) is at $68.11, down $0.24 or -0.35%.
While “there is a risk” the Fed slows the economy more than needed to bring inflation back to the central bank’s 2% target, Powell said, “I would not agree that is the bigger risk. The bigger mistake would be to fail to restore price stability.”
The rally in Treasury bonds and the U.S. Dollar indicate that today’s moves were likely fueled by safe-haven buying over fears of a recession.
The main trend is down according to the daily swing chart. Reaffirming the downtrend was the failure to hold the previous main bottom at .6869. A trade through .6964 will change the main trend to up.
The short-term range is .6851 to .7069. Its 50% level at .6960 is the nearest resistance.
Trader reaction to .6891 is likely to determine the direction of the AUD/USD into the close on Wednesday.
A sustained move under .6891 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the pair of recent main bottoms at .6851 and .6829.
A sustained move over .6891 will signal the presence of buyers. If this creates enough upside momentum then look for a possible retracement into the pivot at .6960 over the short-run.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.