AUD/USD plumbed a new 5-month low after RBA minutes said the bank believes additional interest rate cuts will likely have to be made nRUAIHEF5U.
Bears were able to drive AUD/USD below 0.6835, but the lack of a deeper slide should concern shorts.
Investors are leery of the Fed potentially taking a dovish stance.
Indeed, chances of a Fed cut increased slightly after ECB President Draghi said the bank could ease policy should inflation not head back to its target nECBSINTRA.
U.S. Treasury yields slid and short-term rates markets now imply a 20% chance of a cut Wednesday and greater than 100% chance at the July meeting.
Meanwhile, a potential easing of U.S.-Sino trade tensions from President Trump nW1N22L00P and President Xi nS7N239017 can enhance AUD/USD bears' concerns.
The trade headlines rallied risk sharply, with EM currencies rising sharply against the greenback.
USD/CNH dove below 6.8975 while yen sales drove AUD/JPY above 74.60, and AUD/USD neared resistance near 0.6885.
Price action has AUD/USD daily techs leaning bullish as a hammer candle formed while RSI diverged on the new low.
Should the Fed take a dovish stance tomorrow, AUD/USD short covering will likely ensue leading to a test of the 55-DMA and June's high.
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