The bearish sentiment extends into a new week as the Australian dollar hit a fresh three-week low against its rival, the USD, on Monday at US$0.7226.
The US Dollar Index (US DXY) advanced on Friday after an unexpected rise in U.S. Retail Sales, which has boosted bets on the strength of the U.S. economy and earlier monetary policy tightening by the U.S. Federal Reserve, which is the highlight of this week.
The U.S. Federal Open Markets Committee’s (FOMC) begin their two-day policy meeting Tuesday ahead of its policy announcement on Wednesday afternoon (Thursday 4 am Sydney time).
Eyes will be on what U.S. Fed Chair Jerome Powell says at a post-meeting news conference Wednesday, especially concerning inflation, economic growth, interest rates and when the Fed will likely start reducing its purchases of government bonds.
Also, this week is the release of the minutes from the Reserve Bank of Australia, which could tilt to a dovish tone after the RBA governor Philip Lowe said last week, the central bank does not expect to lift the cash rate until 2024.
Viewing the technical aspect, the bearish bias from the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator is in oversold territory, while Moving Average Convergence Divergence (MACD) holds a negative signal.
The Average Directional Movement Index (ADX) trend indicator holds to a bearish trend.
With the latest decline now reaching the support level at US$0.7230, a neutral bias now holds, as a potential rebound could soon be witnessed.
However, if the bulls fail to show, US$0.7170 is viewed as the next support level.
Any renewed upside coverage today should find a short-term resistance at US$0.7270.