AUD/USD Bears Target 0.6500 Amid Dollar Strength & Debt Ceiling

The AUD/USD bears continue to push the currency pair lower, reaching a multi-day bottom near the 0.6500 level. The strengthening of the US Dollar has contributed to this decline, driven by uncertainty surrounding the extension of the US debt ceiling and concerns about the Federal Reserve's actions.

Market participants anticipate that the Reserve Bank of Australia (RBA) may follow the dovish stance of the Reserve Bank of New Zealand (RBNZ), thereby widening the divergence between the RBA and the Fed. This, coupled with the release of the FOMC Minutes and ongoing discussions within the Federal Reserve, has put pressure on the Australian Dollar (AUD).

The recently published minutes of the FOMC meeting reveal a division among policymakers regarding the recent 0.25% rate hike by the US central bank. This uncertainty casts doubts on the market's expectations of another rate hike in June, despite the hawkish sentiments expressed by Atlanta Fed President Raphael Bostic and Federal Reserve Governor Christopher Waller.

Meanwhile, negotiations surrounding the US debt ceiling extension and the upcoming long weekend for the House Representatives have created contrasting views. While some negotiators believe progress has been made in the talks, rating agencies such as Fitch and Moody's have expressed caution regarding the US credit rating status. The US Treasury Department has acknowledged these concerns.

In light of these developments, US stock futures are experiencing a downturn, and US Treasury bond yields have reached their highest levels since mid-March.

Looking ahead, the market will closely monitor the progress of the debt ceiling talks for clearer indications. Additionally, key economic indicators such as US weekly jobless claims, the Chicago Fed National Activity Index, and pending home sales will be released. Given the current situation, our perspective suggests a continuation of the short setup, targeting the level of 0.6500

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