The Australian dollar grinds lower on Wednesday, refreshing the daily intraday lows as the bears slowly sink in their claws and look to US$0.6915 to the established bull camp at US$0.6845-55.
On Tuesday, at the Sydney American Chamber of Commerce event, the Reserve Bank of Australia (RBA) Governor Philip Lowe said, “So we don’t see a recession on the horizon, but if the last two years have taught us anything, you can’t rule anything out.”
Dr Lowe added that he did not see a risk of recession in Australia in the coming months.
However, on the degree of monthly interest rate increases, Dr Lowe said the board discussed the options of 25 or 50 basis points at the June meeting.
“The Board is committed to doing what is necessary to ensure that inflation returns to the 2 to 3 per cent target range over time. High inflation damages the economy, reduces the purchasing power of people’s incomes and devalues people’s savings,” Lowe said.
Looking ahead, the U.S. Federal Reserve Chair Jerome Powell heads to the U.S. Congress for his semi-annual congressional testimony.
U.S. Fed Powell will need to justify last week’s biggest rate hike since 1994 in front of the Senate Banking Committee this Wednesday and Friday.
Based on the technical assessment, the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator has buckled and is negative, while the Moving Average Convergence Divergence (MACD) oscillator supports a negative bias, with the ADX indicator holds to a ranging market.
As mentioned, market bulls are expected to regroup from the key support area at US$0.6845-55 and defend this region.
A clearance of US$0.7015 should ignite renewed momentum to US$0.7100. Reassess from there.