AUD/USD Bearish Breakout?

​The AUD/USD pair has fallen to a fresh 2021 low of 0.7479. The pair has lost roughly 200 pips since Monday, the largest weekly decline since September 2020. So what was the catalyst for such a slide? Yes, it was the US Federal Reserve giving the market a bit of a surpirse with a more hawkish stance.

US Federal Reserve

The Fed has been consistent in saying that they will react to actual data and not forecasts, however, there seems to have been a change in the wind! More Fed members are actually talking about tapering based on the speed of the recovery and the pace of vaccinations.
After reviewing their forecasts on growth and inflation for this year and the next, they have brought forward the possibility of increasing rates, as the dot-plot now shows two possible hikes for 2023. Chairman Powell said that they are thinking on thinking of tapering but clarified that they would provide plenty of notice in advance of any moves.

Reserve Bank of Australia

Meanwhile, the Reserve Bank of Australia released the Minutes of their latest meeting. Policymakers agreed it would be “premature” to consider ending the bond-buying program, and have reiterated that they do not expect a tight labour market and higher inflation until at least 2024. The statement was no surprise and tells us that the RBA is far behind the Fed.

Australian Data

Australia published May employment figures, which showed that the country added 115,200 positions in May, much better than expected. The Unemployment Rate contracted to 5.1%, returning to pre-pandemic levels. 
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US Data

The economic data in the US is painting a more dissapointing picture. May Retail Sales were down by 1.3% month on month which was worse than expected. Initial Jobless Claims for the week ended June 11th increased to 412K  versus an expected decline to 359K.

The Economic Calendar

Looking forward at the Australian macroeconomic calendar, we've got the preliminary estimate of May Retail Sales and the preliminary June Commonwealth Bank PMIs. In the US, we've got the final version of Q1 GDP and PCE inflation as well as May Durable Goods Orders. On Friday, the focus will be on the country’s May Personal Consumption Expenditures Price Index, previously at 3.6% year on year. However, the focus will be on Fed Chair Jerome Powell, who will testify before Congress on Tuesday.