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  • AUD/USD extends post-Fed losses as RBA Governor Philip Lowe sounds indecisive.
  • RBA’s Lowe said that it will be premature to be considering ceasing bond purchases.
  • S&P 500 Futures extend losses, US Treasury yields stay firmer as markets digest Fed action.
  • Australia Employment Change will be the key, US data, risk catalysts should entertain traders as well.

AUD/USD got another blow to the south, near 0.7600 by the press time, as RBA Governor Lowe sounds cautious over tapering and rate hikes during early Thursday’s speech. The Aussie pair marked the heaviest slump in two weeks the previous day, after the US Federal Reserve’s (Fed) monetary policy announcements, down 0.10% intraday by the pres time of the Asian session.

RBA Governor Philip Lowe mentions that the Aussie economy is still “in the recovery phase, some way to go yet” during his latest speech. RBA’s Chief also said, “Inflation pressures remain subdued and are likely to remain so,” as well as, “Wages growth subdued as firms focus on curbing costs.”

Read:  RBA Lowe: Aussie economy needs stimulus

Following the speech, AUD/USD stretches the previous day’s downside amid fears of further sluggish economic moves in Australia. Also weighing the quote could be the downbeat mood of the markets.

Market sentiment remains in favor of the US bonds and the greenback, weighing down equities and commodities, amid expectations of sooner recall of the easy money following that Fed’s early signals of tapering and the rate hikes. That said, S&P 500 Futures drop 0.35% while the US 10-year Treasury yields stay firmer around an eight-day top after rising the most since early March on Wednesday.

Although the Fed left benchmark interest rates and bond purchases intact, the US central bank’s upward revision to economics and rate forecast triggered the market’s rush to the bonds, US dollar the previous day. That said, the US Federal Reserve (Fed) now expects US GDP to grow 7.0% in 2021 versus 6.5% previous whereas the PCE figure, the Fed’s preferred inflation gauge, is seen at 3.4% for 2021 and 2.1% for the next year.

Further, rate-hike expectations, mostly known as dot-plot, suggest that seven Fed officials expect lift-off in 2022 and 13 in 2023. Additionally, Fed Chairman Jerome Powell accepted that the inflation run-up could be more consistent than earlier expected and weighed on the market sentiment, as well as on the AUD/USD prices the previous day.

Looking forward, Australia’s jobs report for May will be the key nearby catalyst ahead of the US second-tier data. Among the Aussie employment figures, the Unemployment Rate is likely to remain unchanged at 5.5% and the Participation Rate may also inch a bit up to 66.1% from 66.0% prior, making them less important if matching the forecast. However, the expected jump in Employment Change to +30K from -30.6K will be the key to follow and can recall AUD/USD buyers should the market consensus prove right.

Read:  Australian Employment Preview: Long way to recovery

Technical analysis

Having breached the ascending trend line connecting lows marked in mid-April and early June, around 0.7655, AUD/USD becomes vulnerable to test 0.7560-50 area comprising lows marked in February and March, also 200-day SMA, during the further weakness. It’s worth noting that June 03 low near 0.7645 guards the Aussie pair’s immediate upside.