AUD/USD reacts to risk aversion ahead of Fed’s meeting

The AUD/USD pair has encountered intermediate support around 0.7050, however, more downside seems potential as well amid ongoing risk aversion on the eve of the first day of the Fed’s first policy meeting in 2023.

Investors have turned risk-averse ahead of the release of the interest rate policy by the Fed. The decline in monthly Australian Retail Sales might ease some troubles for the Reserve Bank of Australia. The pair managed to gauge an intermediate support around 0.7050 in the early Asian session.

The Australian dollar has witnessed immense selling pressure and is showing a less-confident pullback move; however, the downside is still favored as the risk profile is still negative. Fed’s looming monetary policy decision has triggered volatility which is forcing investors to strongly rid of riskier assets.

S&P500 tumbled on Monday as investors are worried that further interest rate hikes by Fed chair Jerome Powell will escalate recession fears. Consumer spending will get trimmed, employment opportunities will get limited and producers might operate on the lower capacity to augment higher interest rates by the Fed.

The US Dollar Index broke into above the critical resistance of 101.80 and drove to near 101.90 as investors reinforced the risk aversion climate.

On the Australian front, investors are keeping an eye on Tuesday’s monthly retail sales data, which is expected to display de-growth of 0.3% from the prior release of 1.4%. This might ease some troubles for the Reserve Bank of Australia, which is struggling to combat inflation.