• The aussie trims losses and returns to the 0.6400 area.
• Fed hike expectations are strengthening the USD.
• AUD/USD should breach 0.6430 to ease downside pressure.

The Australian dollar is trimming losses on Monday’s US trading session and has reached the 0.6400 level, after having found support at 0.6365 earlier today. On the daily chart, the pair remains slightly lower after having entered the week on the back foot.

Hopes of a hawkish Fed are hurting the aussie

With the focus on the several monetary policy decisions scheduled this week, and with special attention on the US Federal Reserve, investors have remained cautious today. The Fed is widely expected to hike rates by 75 basis points for the fourth consecutive time, which is underpinning demand for the USD.

Furthermore, the downbeat Chinese Manufacturing PMI figures released earlier today have revived fears of a global economic slowdown. These figures have hammered risk appetite during the Asian session, increasing negative pressure on the risk-sensitive AUD.

In Australia, the RBA will announce its monetary policy decision on Tuesday. The event, however, is failing to provide any relevant support to the Aussie. The bank placed itself on the dovish side of the spectrum with a dovish rate hike on early October and the market has priced in a slowdown in the bank's tightening path over the months ahead.

AUD/USD should breach 0.6430m to ease downward pressure – UOB

FX analysts at UOB see the pair gaining downward traction, and point out to 0.6430 as a key level on the upside: “AUD dipped to a low of 0.6389. Downward momentum has improved a tad and AUD is likely to edge lower today, but a clear break of 0.6370 is unlikely. Resistance is at 0.6430 but only a break of 0.6460 would indicate that the current mild downward pressure has subsided.”

Technical levels to watch