AUD/USD tracks S&P 500 Futures to print seven-week low under 0.7100
|- AUD/USD takes offers to refresh multi-day low, down for the second consecutive day.
- S&P 500 Futures drop 1.5%, ASX 200 drops over 10% from monthly peak while declining 2.5% intraday.
- US dollar reacts positively to the hawkish Fed, riskier assets drown.
- Geopolitical and financial fears join Omicron headlines to exert additional downside pressure ahead of US Q4 Advance GDP.
With the post-Fed risk aversion in full steam, AUD/USD drops half a percent to print the biggest daily fall in a week around 0.7080. In doing so, the Aussie pair declines to the lowest levels since December 07 amid the very early Thursday morning in Europe.
In addition to the Fed-led risk-off mood, fears of China’s financial market crackdown due to Evergrande join the Russia-Ukraine tussles and virus woes to add to the AUD/USD weakness.
Recently, Evergrande said it is targeting a restructuring proposal within six months. Elsewhere, the US State Department warned Russia over Nordstorm 2 oil pipeline if it invades Ukraine. Additionally, record high daily covid infection numbers in Japan and heavy pressure on the Aussie medical system due to the South African COVID-19 variant portray the coronavirus woes and weigh on the AUD/USD prices.
It's worth mentioning that China's slowest industrial profit growth in nine months and softer Westpac Leading Index for Australia also weigh on the AUD/USD prices. On the same line were softer-than-previous readings of Aussie Export Price Index and Import Price Index for Q4.
On Wednesday, the US Federal Reserve (Fed) matched wide market expectations to keep benchmark interest rates and tapering targets intact during Wednesday’s Federal Open Market Committee (FOMC) meeting. However, the interesting part from the Monetary Policy Statement was, “The Committee expects it will soon be appropriate to raise the target range for the federal funds rate.”
Amid these plays, S&P 500 Futures drop 1.5% while the US 10-year Treasury yields remain firmer around 1.85%, after rising the most in three weeks the previous day.
At home, Australia’s ASX 200 drops 2.5% intraday at the latest, which in turn signals the Aussie equity benchmark’s more than 10% declines from the monthly high. The reason could be linked to the escalating hopes of the Reserve Bank of Australia’s (RBA) rate hikes.
That said, AUD/USD traders will pay attention to the aforementioned risk catalysts for fresh impulse, mostly to confirm further bearish bias. However, the first readings of the US Q4 GDP and Durable Goods Orders for December will be important to watch afterward.
Technical analysis
Having confirmed a rising wedge bearish chart pattern during the last Friday, AUD/USD prices are vulnerable to drop towards the year 2021 bottom surrounding 0.6990.
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