• AUD/USD drops to its lowest level since May 2020 amid broad-based USD strength.
  • Bets for more aggressive Fed rate hikes, elevated US bond yields underpin the buck.
  • The risk-off mood further benefits the USD and weighs on the risk-sensitive aussie.

The AUD/USD pair continues losing ground through the first half of the European session on Friday and drops to the 0.6565 area or its lowest level since May 2020.

The US dollar catches fresh bids on the last day of the week and hits a new 20-year peak, which turns out to be a key factor exerting downward pressure on the AUD/USD pair. The Federal Reserve struck a more hawkish tone on Wednesday and signalled that it will undertake more aggressive rate increases to cap inflation. This, in turn, remains supportive of elevated US Treasury bond yields and continues to act as a tailwind for the greenback.

In fact, the yield on the rate-sensitive two-year US government bond touched a fresh 15-year high and the benchmark 10-year Treasury note jumped to its highest level since 2011 on Thursday. Meanwhile, investors remain concerned that rapidly rising borrowing costs will lead to a deeper global economic downturn. This, in turn, tempers investors' appetite for riskier assets and is further underpinning demand for the traditional safe-haven buck.

Apart from this, economic headwinds stemming from China's zero-covid policy and the risk of a further escalation in the Russia-Ukraine conflict, have been fueling recession fears. This is seen as another factor contributing to driving flows away from the risk-sensitive aussie. With oscillators still far from being in the oversold territory, the fundamental backdrop supports prospects for an extension of the depreciating move for the AUD/USD pair.

Market participants now look forward to the release of the flash US PMI prints, due later during the early North American session. This, along with the US bond yields and Fed Chair Jerome Powell's speech at an event in Washington, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities heading into the weekend.

Technical levels to watch

AUD/USD

Overview
Today last price 0.6567
Today Daily Change -0.0077
Today Daily Change % -1.16
Today daily open 0.6644
 
Trends
Daily SMA20 0.6775
Daily SMA50 0.6882
Daily SMA100 0.6933
Daily SMA200 0.7097
 
Levels
Previous Daily High 0.6671
Previous Daily Low 0.6574
Previous Weekly High 0.6916
Previous Weekly Low 0.667
Previous Monthly High 0.7137
Previous Monthly Low 0.6835
Daily Fibonacci 38.2% 0.6634
Daily Fibonacci 61.8% 0.6611
Daily Pivot Point S1 0.6589
Daily Pivot Point S2 0.6533
Daily Pivot Point S3 0.6492
Daily Pivot Point R1 0.6685
Daily Pivot Point R2 0.6726
Daily Pivot Point R3 0.6782

 

 

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