AUD/USD Sticks To Modest Losses And Weakness Further Below The 0.68800 Level

• AUD/USD pair weakness further below the 0.68800 level on Monday amid strong USD demand
• A strong leg-up in the treasury bond yields bolstered by hawkish remarks by Federal Reserve Chairman Jerome Powell during the Jackson Hole Economic Symposium underpins the greenback and exerts downward pressure on AUD/USD pair
• The current price action suggests the market has priced in a negative macro data reading from the Australian docket
• The U.S. Bureau of Labor Statistics to release the U.S. Private NFP report on Friday

AUD/USD Pair declined on Monday, remaining under heavy downward bearish pressure, and dropped to a fresh daily low below 0.68800 level to extend heavy losses around the pair witnessed since last Friday. The pair is now trading at 0.68600, posting a 33.8% daily low. AUD/USD stays in the negative territory amid a strong U.S. Dollar across the board, as the risk-off market mood underpinned the safe-haven greenback and drove flows away from the risk-sensitive Aussie dollar.

A strong leg-up in the treasury bond yields bolstered by hawkish remarks by the Federal Reserve Chairman, Jerome Powell, in his speech on the central bank's tightening path turned out to be a key factor that weighed on the AUD/USD pair. The 10-year Treasury yield traded at 3.032%, up less than one basis point, while The 2-year rate rose less than one basis point to 3.382%.

The U.S. Dollar index(DXY), which measures the value of the United States dollar relative to a basket of foreign currencies, rose to 108.78, up 0.30% on the day. After earlier falling as low as 107.54 on Friday following Jerome Powell's hawkish tone toward battling inflation but did not settle the debate on how significant a rate increase is likely at the U.S. central bank's September meeting. 

The U.S. economy will need tight monetary policy "for some time" before inflation is under control. This means slower growth, a weaker job market, and "some pain" for households and businesses. On Friday, Powell warned that there is no quick cure for fast-rising prices. "We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2%," he said.

"I think overall the Fed chairman was really hawkish, but not above and beyond what had been priced in and I think the jury is still out on whether or not we see a 50 or 75 basis point rate hike next month," said Joe Manimbo, senior market analyst at Convera in Washington.

In fact, following Powell's remarks, Atlanta Fed President Raphael Bostic told CNBC's Steve Liesman that Friday's report would make him lean slightly toward a half-point rate hike in September. A slowdown from the three-quarters of a point rises the Fed has done in its previous two meetings. However, Bostic stressed that more economic data in the weeks ahead could change his mind.

Powell's remarks come after the Bureau of Economic Analysis reported on Friday that the personal consumption expenditures price index — the Fed's preferred inflation gauge — rose 6.3% last month on a year-over-year basis. Additionally, The core PCE index, which excludes volatile food and energy prices, showed a 4.6% rise year over year and a gain of 0.1% month over month in July, coming in softer than forecasts on both counts. 

The PCE reading comes about two weeks after the July consumer price index report, which showed a slower-than-expected rise in prices year over year and 0% inflation monthly. That report led some Wall Street strategists to say that inflation had likely peaked.

Going forward, The current price action suggests the market has priced in a negative macro data reading from the Australian docket. The Australian Bureau of Statistics will announce the Australia Retail Sales (MOM) report. The change in monthly estimates of turnover and volumes for retail business is expected to remain unchanged in July at 0.2% MOM against a preliminary reading of 0.2% MOM. 

As we advance, the focus now shifts toward the release of the U.S. Private Non-farm payrolls report, in which 471,000 Jobs are expected to have been created in the month of August, up from 404,000 jobs created in July and against a preliminary figure of 230,000 Jobs.

AUD/USD Technical Outlook: Four Hours Price Chart

From a technical perspective, spot prices are now looking to extend the momentum beyond the upward-sloping trendline from the July 2022 swing low. Today's strong move beyond the 0.68836 mark confirmed a solid bearish breakout and supported prospects for additional losses. The bearish momentum, however, faces stiff resistance from the immediate hurdle(Demand zone), ranging from 0.68544- 0.68670 levels. The aforementioned zone would act as a barricade against the pair against any further downtick. However, a clean break below the mentioned hurdle would be seen as a new trigger for bears to continue pushing the price down and pave the way for additional losses.

The RSI(14) level at 38.08 is on the verge of breaking into oversold territory and warrants some caution ahead of today's Australian key event. The moving average convergence divergence (MACD) crossover at 0.00080 paints a bearish filter. Additionally, The 20 and 50 Exponential Moving Average(EMA) crossover at the 0.69474 level on the one-hour chart further adds to the downside bias. On the Flipside, a pullback toward testing the upward-sloping trendline of the pennant chart pattern turned resistance level followed by a convincing break above the aforementioned trendline would negate any near-term bearish outlook and pave the way for technical buying.