- Sustained USD buying dragged AUD/USD lower for the third consecutive session on Wednesday.
- The risk-off impulse boosted the already stronger USD and weighed on the perceived riskier aussie.
- Oversold RSI on the 1-hourly chart held traders from placing fresh bearish bets and helped limit losses.
The AUD/USD quickly recovered around 20 pips from one-week lows touched in the last hour and was last seen trading with only modest losses, around the 0.7370-65 region.
The pair extended the previous day's post-RBA decline from the 0.7465-70 region and continued losing ground through the early part of the European session on Wednesday. This marked the third consecutive day of a negative move and was sponsored by a combination of factors.
Investors turned risk-averse amid worries about the economic fallout from the fast-spreading Delta variant of the coronavirus. This was evident from a sharp pullback in the global equity markets, which benefitted the safe-haven US dollar and weighed on the perceived riskier aussie.
Meanwhile, expectations for an imminent Fed taper announcement in 2021 pushed the yield on the benchmark 10-year US government bond to the highest level since mid-July, around 1.385% on Tuesday. This was seen as another factor that acted as a tailwind for the greenback.
The Australian dollar was further pressured by the RBA's dovish announcement on Tuesday. The central bank moved ahead with its plan and reduced the pace of its bond-buying to A$4 billion a week, albeit decided to extend the purchase period from November 2021 to February 2022.
Apart from this, the downfall could further be attributed to some technical selling on a sustained break below the 0.7400 round-figure mark. That said, oversold RSI (14) on the 1-hour chart assisted the AUD/USD pair to find some support near the 0.7350-45 region.
There isn't any major market-moving economic data due for release from the US on Wednesday, leaving the AUD/USD pair at the mercy of the USD price dynamics. This, along with the broader market risk sentiment, should allow traders to grab some short-term opportunities around the major.
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. 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 stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.