AUD/USD struggles near multi-week lows, around 0.7230-35 zone
|- A combination of factors dragged AUD/USD to four-week lows on Monday.
- Hawkish Fed expectations continued acting as a tailwind for the greenback.
- The risk-off mood further drove flows away from the perceived riskier aussie.
The AUD/USD pair now seems to have entered a bearish consolidation phase and was last seen trading around the 0.7230-35 region, just above the four-week lows touched earlier this Monday.
The pair prolonged its recent sharp pullback from the 0.7475-80 region and witnessed some follow-through selling on the first day of a new trading week. The downfall was sponsored by a strong bullish sentiment surrounding the US dollar and the risk-off impulse in the markets, which tends to weigh on the perceived riskier aussie.
The USD remained well supported by expectations that the Fed would begin rolling back its massive pandemic-era stimulus sooner rather than later. This, along with worries about the fast-spreading Delta variant and a global economic slowdown, weighed on investors' sentiment and triggered a selloff in the equity markets.
Apart from this, the re-escalation of tensions between China and Western countries, namely the US, UK and Australia, exerted additional pressure on the China-proxy aussie. That said, extremely oversold conditions on hourly charts held traders from placing fresh bearish bets and helped limit any further losses for the AUD/USD pair.
There isn't any major market-moving economic data due for release from the US on Monday. Hence, the broader market risk sentiment and the US bond yields will play a key role in influencing the USD price dynamics. This, in turn, might provide some impetus to the AUD/USD pair ahead of the RBA meeting minutes on Tuesday.
The key focus, however, will remain on the critical FOMC monetary policy meeting, starting on Tuesday. Investors will look for clues about the likely timing of when the Fed would begin tapering its bond purchases. This, in turn, will drive the USD and assist traders to determine the AUD/USD pair's near-term trajectory.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.