- AUD/USD pauses two-day downtrend at 28-month low, paring losses of late.
- Risk-off mood joined firmer yields to weigh on the pair.
- Panic selling of the GBPUSD, calls for central bank intervention contributed to the sour sentiment.
- Bears are likely to keep reins amid light calendar, corrective bounce can’t be ruled out.
AUD/USD justified its risk-barometer status as markets panicked on Monday before traders licked their wounds near 0.6460 during Tuesday’s early Asian session. The quote’s latest weakness could be linked to the broad pessimism amid the GBP/USD pair’s plunge that raised concerns over multiple central bank interventions.
GBP/USD slumped to an all-time low on Monday amid the market’s scathing rejection of the new tax-cut measures, fearing more burden on the monetary policymakers and fiscal budget. The same triggered speculations that the Bank of England (BOE) needs to intervene to defend the domestic currency, allowing the cable to pare some losses. However, the British central bank refrained from any immediate moves and renewed the selling of the Cable.
At home, the People’s Bank of China’s (PBOC) updates surrounding the increase in the Forex reserves tried to defend the AUD/USD buyers recently but failed amid the risk-off mood.
The sour sentiment pushed market players to demand a premium and pushed the Treasury yields towards the north, which joined the hawkish Fedspeak to propel the US dollar and weigh on the AUD/USD prices. Also portraying the risk-aversion was the downbeat performance of the global equities, tracked by Wall Street.
On Monday, Chicago Fed National Activity Index weakened to 0.0 in August versus 0.09 market expectations and an upwardly revised prior reading of 0.29. Even so, Boston Fed President Susan Collins said, per Reuters, “Getting inflation down will require slower employment growth, somewhat higher unemployment rate”. Following that, Cleveland Fed President Loretta Mester said on Monday that if there is an error to be made, better that the Fed do too much than to do too little.
That said, AUD/USD traders will likely witness hardship in extending the latest rebound amid economic fears. With that in mind, today’s US CB Consumer Confidence for September and Durable Goods Orders for August will be crucial to watch for immediate directions.
Also read: US Consumer Confidence Preview: Near-term relief or more risk aversion?
Technical analysis
Despite the latest pause in the downside, a clear break of the four-month-old bearish channel’s support line, now resistance around 0.6500, keeps AUD/USD bears hopeful of visiting the 78.6% Fibonacci Expansion (FE) of April-August moves, near 0.6360.
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.
Recommended content
Editors’ Picks
EUR/USD recovers above 1.0400, looks to post weekly gains
EUR/USD regained its traction after dropping toward 1.0350 in the early American session and climbed above 1.0400. Trading conditions remain thin on Black Friday and the pair remains on track to end the week in positive territory.
GBP/USD recovers toward 1.2100 as US Dollar loses strength
GBP/USD managed to stage a recovery toward 1.2100 in the American session on Friday and now looks to register gains for the third straight week. The US Dollar struggles to preserve its strength as markets remain subdued on Black Friday.
Gold steadies near $1,750 as US yields retreat
Gold price continues to move sideways at around $1,750 heading into the weekend. The benchmark 10-year US Treasury bond yield retreated from the daily high it touched above 3.75% earlier in the day, allowing XAU/USD to erase a portion of its daily losses.
Bitcoin: Assessing chances of one last bear market rally for 2022
Bitcoin price is in a good place to trigger another bear market rally from a high-time frame perspective. This development, combined with the optimistic outlook seen in on-chain metrics, further strengthens the possibility of a happy ending to 2022.
FX next week and yield curve inversions
Since the Fed's last raise November 3, Fed Funds rate opens and closes at 3.83. The Fed Funds rate once traded freely on its own with highs and lows as any financial instrument. In 2000, Central banks implemented meetings every 6 weeks.