AUD/USD gave up early risk-on gains nL1N2CV0KR after Fed Chair Powell pushed back on negative rates, but price action suggests longs are in no rush to exit positions.
The U.S. dollar and interest rates rallied after Powell said policymakers weren't considering negative rates.
Overall risk sentiment soured on the comments, which resulted in equities ESv1 and AUD/JPY turning negative on the day.
AUD/USD dropped below the 10-DMA but trades close to the midpoint of the 0.6370-0.6570 range in place since April 30.
The lack of an intense downside move for AUD/USD suggests investors believe bullish factors remain.
While U.S. rates rallied after Powell they still remain low and fed funds futures still price in negative rates for March 2021 FFH1.
AUD/USD investors could also be looking at buoyant copper HGv1 and iron-ore DCIOc2 futures prices, which could help temper any downside AUD/USD moves.
Should AUD/USD continue to consolidate gains from the March-April rally and hold above support near 0.6370 a test of the big 0.6670/90 zone can't be ruled out.
If risk sentiment deteriorates sharply though AUD/USD's downside risks will grow.
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