• AUD/USD dropped below 0.6700 after Fed’s dovish rate hike.
• Fed policymakers remained compromised to tame inflation and mentioned the tight labor market.
• The Fed’s dot plot remained unchanged, with officials expecting to raise rates toward 5.10%.

The AUD/USD finished Wednesday’s session in the green, gaining 0.26%, though well below the day’s highs at 0.6758. As the Asian Pacific session begins, the AUD/USD trades at 0.6683, slightly below its opening price by 0.01%.

AUD/USD opens the Asian session flat after Fed’s hike

On Wednesday, the US Federal Reserve (Fed) revealed its decision to raise rates by 25 bps and opened the door for an additional quarter of a percentage hike. The banking crisis spurred three weeks ago changed Fed officials’ approach to the March meeting. Given that the US government had to step in after the collapse of two regional banks in the United States (US), it pushed Fed’s Powell 50 bps off the table.

Fed policymakers stressed that inflation remains elevated, and the labor market is tight. Policymakers commented that the balance sheet reduction, known as Quantitative Tightening (QT), would continue as planned. The dot plot was almost unchanged, with most Fed officials expecting the Federal Funds Rate (FFR) to peak at around 5.10%.

At the same time, the US Secretary of Treasure Janet Yellen said that “regulators aren’t looking to provide “blanket” deposit insurance to stabilize the US banking system,” according to Bloomberg. That rattled the US equity markets, which ended with an average of 1.60% losses on its three major indices, blamed on Yellen comments.

All that said, US Treasury bond yields registered losses as investors reassessed a less hawkish Fed. The US 10-year benchmark note rate collapsed 17 bps at 3.451%, undermining the greenback. The US Dollar Index fell to a fresh monthly low of 102.065 but reversed its course and is trading at 102.544, down 0.65%.

On the Australian front, an absent economic docket will leave traders adrift to US Dollar (USD) dynamics and market sentiment.

AUD/USD Technical analysis

The AUD/USD remains neutral to downward biased after failing to hold to gains above the 20-day Exponential Moving Average (EMA). Furthermore, the Relative Strength Index (RSI) is bearish, while the Rate of Change (RoC) suggests that sellers are gathering momentum. Hence, the AUD/USD first support would be 0.6600, followed by the YTD low at 0.6564. Once broken, the AUD/USD pair would tumble as low as the November 10 low at 0.6386.