AUD/USD weakens further below 0.6700, over one-week low amid modest USD uptick
|- AUD/USD remains under some selling pressure for the second successive day on Monday.
- Bets for more rate hikes by the Fed help revive the USD demand and exert some pressure.
- A softer risk tone also benefits the safe-haven buck and weighs on the risk-sensitive Aussie.
The AUD/USD drifts lower for the second successive day on Monday and drops to a one-and-half-week low, around the 0.6675 region during the Asian session.
A combination of factors assists the US Dollar (USD) to gain some positive traction on the first day of the new week, which, in turn, is seen exerting downward pressure on the AUD/USD pair. The recent hawkish signals by several Federal Reserve (Fed) officials reaffirmed market bets for another 25 bps lift-off at the next FOMC meeting in May. Adding to this, the incoming US macro data suggested that the world's largest economy remained resilient and supported prospects for further policy tightening by the Fed.
The flash version of the S&P Global's PMI survey showed that the overall business activity in the US private sector expanded at a faster pace in April, with the Composite PMI rising from 52.3 in March to 53.5, or the highest since May last year. The upturn was led by the service sector, where activity grew for a third successive month and at the fastest rate for a year. Adding to this, the gauge for the US manufacturing sector moved in the expansion territory for the first time since October 2022, indicating growth momentum.
The data reinforced expectations that the Fed will continue lifting interest rates to curb inflation and fuels worries about economic headwinds stemming from rising borrowing costs. This, in turn, tempers investors' appetite for riskier assets, which is evident from a generally weaker tone around the equity markets. The anti-risk flow is seen as another factor that benefits the Greenback's relative safe-haven status and weighs on the risk-sensitive Aussie, suggesting that the path of least resistance for the AUD/USD pair is to the downside.
That said, the recent pullback in the US Treasury bond yields might hold back the USD bulls from placing aggressive bets. Apart from this, the hawkish tone from the Reserve Bank of Australia's (RBA) April meeting minutes and the upbeat China macro data released last week should help limit losses for the AUD/USD pair. There isn't any relevant market-moving economic data due for release from the US on Monday. Hence, traders will take cues from the broader risk sentiment to grab short-term opportunities around the pair.
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.