• AUD/USD retreated sharply from a one-week high set on Wednesday amid resurgent USD demand.
  • Aggressive Fed rate hike bets, elevated US bond yields and recession fears benefitted the greenback.
  • RBA’s signal that a bigger rate hike is possible extended support to the aussie and helped limit losses.
  • The pair attracted fresh buying on Thursday and seemed unaffected by the mixed domestic jobs data.

The AUD/USD pair witnessed an intraday turnaround from the vicinity of mid-0.7000s, or a one-week high touched earlier on Wednesday and snapped three successive days of the winning streak. The US dollar made a solid comeback and stalled its recent corrective slide from a two-decade high, which, in turn, was seen as a key factor that exerted downward pressure on the major. Fed Chair Jerome Powell struck a more hawkish tone on Tuesday and said that he will back interest rate increases until prices start falling back toward a healthy level. The comments reaffirmed market bets that the Fed would tighten its monetary policy at a faster pace to curb soaring inflation and helped revive the USD demand.

The prospects for a more aggressive policy tightening by the Fed, along with the Russia-Ukraine war and extended COVID-19 lockdowns in China, raised concerns about softening global economic growth. This, in turn, took its toll on the risk sentiment, which was evident from the overnight steep decline in the US equity markets. The anti-risk flow was seen as another factor that benefitted the greenback's relative safe-haven status and exerted additional downward pressure on the perceived riskier aussie. That said, a more hawkish outlook by the Reserve Bank of Australia, signalling that a bigger interest rate hike is still possible in June amid the upside risks to inflation, extended support to the domestic currency.

Apart from this, modest USD downtick assisted the AUD/USD pair to attract some dip-buying near the mid-0.6900s during the Asian session on Thursday. The uptick pushed spot prices back above the 0.7000 psychological mark and seemed rather unaffected by mixed Australian monthly employment details. The Australian Bureau of Statistics reported the jobless rate fell to 3.9% in April, the lowest level in almost 50 years. That said, the number of employed people only increased by 4K against the 30K expected. The disappointment, to a larger extent, was offset by a sharp rise in full-time employment, by 92.4K. Bulls, however, struggled to capitalize on the move amid a generally weaker risk tone. Furthermore, elevated US Treasury bond yields should act as a tailwind for the buck and cap gains for the pair.

Market participants now look forward to the US economic docket, featuring the release of the Philly Fed Manufacturing Index, the usual Weekly Initial Jobless Claims and Existing Home Sales data. Apart from this, the US bond yields and the broader market risk sentiment, would drive the USD demand and provide some meaningful impetus to the AUD/USD pair. Nevertheless, the fundamental backdrop suggests that the path of least resistance for the pair is to the downside and any meaningful upside might still be seen as a selling opportunity.

Technical outlook

From a technical perspective, the recent bounce from the YTD low faltered on Tuesday near the 50% Fibonacci retracement level of the 0.7267-0.6829 fall. The subsequent slide below the 0.7000 mark or the 38.2% Fibo. level adds credence to the near-term negative outlook. Moreover, the pair's inability to capitalize on the intraday positive move on Thursday supports prospects for a further near-term depreciating move. Hence, some follow-through weakness below the overnight swing low, around mid-0.6900s, en-route the 23.6% Fibo. level near the 0.6930 area, remains a distinct possibility.

Failure to defend the latter would make the AUD/USD pair vulnerable to weaken further below the 0.6900 mark and test the weekly low, around the 0.6870 region. The downward trajectory could further get extended towards challenging the YTD low, around the 0.6830-0.6825 region, before the pair eventually drops to the 0.6800 mark.

On the flip side, the 50% Fibo. level, around the 0.7050 area, coincides with the 100-period SMA on the 4-hour chart. A convincing break through the said confluence hurdle will be seen as a fresh trigger for bullish traders and set the stage for an extension of the recent recovery move. Bulls might then aim to reclaim the 0.7100 mark (61.8% Fibo. level) and lift spot prices further towards the next relevant hurdle near the 0.7135-0.7140 zone.


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. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content

Recommended Content

Editors’ Picks

EUR/USD steadies near 1.0550, looks to post modest weekly gains

EUR/USD steadies near 1.0550, looks to post modest weekly gains

EUR/USD has lost its bullish momentum after having climbed above 1.0570 with the initial reaction to the US data in the American session and retreated toward the mid-1.0500s. On a weekly basis, the pair remains on track to close in positive territory. 


GBP/USD struggles to hold above 1.2300

GBP/USD struggles to hold above 1.2300

GBP/USD has edged lower following a jump above 1.2300 in the early American session on Friday. The market mood remains upbeat ahead of the weekend with Wall Street's main indexes posting strong daily gains on upbeat US data. 


Gold stays below $1,830 as US yields edge higher

Gold stays below $1,830 as US yields edge higher

Gold continues to fluctuate below $1,830 on Friday and looks to close the second straight week in negative territory. Fueled by the risk-positive market environment, the benchmark 10-year US Treasury bond yield is up more than 1% on the day, limiting XAU/USD's upside.

Gold News

Why Cardano could surprise over the weekend

Why Cardano could surprise over the weekend

ADA  set to close out the week with a gain on the workday trading week and over the weekend? Central banks signaled that the rate hike cycle is ending, meaning less stress and tight conditions for trading, opening up room for some upside potential with Cardano set to pop above $0.55 and test a significant cap.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!