The US debt ceiling stalemate has negatively weighed on global riskier assets as investors feared on what the default from the world’s largest economy would mean for the rest of the world. The risk-off sentiment has seen the US dollar gain against its trading partners, with the AUDUSD trading at a four-week low after taking the losses for the week to over 0.8%. 

The recent disappointing Australian PMI reports released on Tuesday have also boosted the bets on a potential rate hike pause from the RBA, compiling on the bearish sentiment on the Aussie. The manufacturing PMI at a flat 48, and the services PMI for May came in at 51.8, lower than April’s figure of 53.7. However, the Aussie could be hoping that the upcoming speech by the RBA member David Jacobs could provide some support before the barrage of economic data from the US, including the 2-3 FOMC meeting minutes due later today. 

Technical 

The 4H chart shows that the Aussie has formed a descending channel as the bears continue to lose ground to the bulls. The recent Australian PMI data raised bets for a potential RBA monetary policy easing, and with some Fed members suggesting the need for further tightening, the monetary policy divergence could continue to dictate the movement of the Aussie in the near term. 

Therefore, an opportunity could exist as the price break below the lower trendline of the channel towards the support level of 0.65743, a level of interest for the bears. A break below 0.65743, supported by the US debt ceiling stalemate, could trigger a selloff towards the 0.65512 support level, the lowest level reached in 2023. 

Hawkish comments from the RBA member D. Jacobs could support the Aussie; however, the 23.60% Fibonacci retracement could act as a significant barrier to any bulls’ attempts to push the price higher in the shorter term. 

Summary 

The diverging monetary policy bets could continue to weigh on the Aussie, with the US debt ceiling stalemates continuing to add bearish pressure on the cross in the near term. Should the bearish momentum continue, a short-term trading opportunity could exist as the cross continues to slide towards the 0.65743 support level, with 0.65512 offering the next level of significance for the bears. 

Sources: TradingView, Reuters, Dow Jones Newswire.  

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