AUD/USD slides further below mid-0.7200s, fresh daily lows
|- A combination of factors prompted fresh selling around AUD/USD on Tuesday.
- Surging US bond yields, the risk-off impulse boosted the safe-haven greenback.
- A sustained break below the 0.7220 support will set the stage for further losses.
The AUD/USD pair remained depressed heading into the North American session and was last seen hovering near daily lows, just below mid-0.7200s.
The pair struggled to capitalize on its modest intraday uptick, instead met with some fresh supply near the 0.7310 region and has now reversed the previous day's positive move. The US dollar tracked a strong move up in the US Treasury bond yields and shot to the highest level since August 20. This, in turn, was seen as a key factor that exerted downward pressure on the AUD/USD pair.
In fact, the yield on the benchmark 10-year US government bond to the highest level since June 17 amid prospects for an early policy tightening by the Fed. It is worth recalling that the Fed hinted last week that it would begin rolling back its massive pandemic-era stimulus as soon as November. Moreover, the dot plot pointed to policymakers' inclination to raise interest rates in 2022.
Apart from this, the risk-off impulse in the markets provided an additional boost to the safe-haven greenback and further weighed on the perceived riskier aussie. Investors remain worried about potential risks from the debt crisis at China Evergrande. This, along with a selloff in the money markets and the intensifying energy crisis, took its toll on the global risk sentiment.
With the latest leg down, the AUD/USD pair has now drifted back closer to strong horizontal support near the 0.7220 region. A sustained breakthrough, leading to a subsequent slide below the 0.7200 mark will be seen as a fresh trigger for bearish traders. This, in turn, will set the stage for further losses and allow bearish traders to challenge YTD lows, around the 0.7100 mark.
Market participants now look forward to Fed Chair Jerome Powell's testimony before the Senate Banking Committee. This will be accompanied by the release of the Conference Board's Consumer Confidence Index. Apart from this, the US bond yields, along with the broader market risk sentiment will influence the USD and provide some impetus to the AUD/USD pair.
Technical levels to watch
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