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AUD/USD drops to its lowest level since January, below mid-0.6800s amid stronger USD

  • AUD/USD remains under some selling pressure for the third successive day on Friday.
  • Hawkish Fed expectations, recession fears underpin the buck and weigh on the major.
  • Technical selling below the 50-day SMA further contributes to the ongoing downfall.

The AUD/USD pair extends this week's retracement slide from the 0.7030 area and continues losing ground for the third successive day on Friday. The downward trajectory drags spot prices to the lowest level since January 6 during the Asian session and is sponsored by broad-based US Dollar strength.

In fact, the USD Index, which tracks the Greenback against a basket of currencies, hits a fresh six-week high amid firming expectations for further policy tightening by the Fed. Investors seem convinced that the US central bank will stick to its hawkish stance in the wake of stubbornly high inflation. Moreover, the incoming upbeat US macro data points to an economy that remains resilient despite rising borrowing costs. This, along with the recent hawkish remarks by several FOMC members, suggests that the Fed will continue to hike interest rates.

The markets are now pricing in at least a 25 bps lift-off at each of the next two FOMC policy meetings in March and May. This, in turn, pushes the yield on the benchmark 10-year US Treasury note to its highest level since late December and is seen underpinning the buck. Meanwhile, worries about economic headwinds stemming from rapidly rising interest rates weigh on investors' sentiment. This is evident from a weaker tone around the equity markets, which further benefits the safe-haven USD and drives flows away from the risk-sensitive Aussie.

Apart from the aforementioned fundamental factors, the AUD/USD pair's downfall could also be attributed to some technical selling following the overnight break below the 50-day SMA. This comes on the back of the recent repeated failures to find acceptance above the 0.7000 psychological mark and might have already set the stage for further losses. Moreover, bearish oscillators on the daily chart add credence to the near-term negative outlook.

This, in turn, suggests that the path of least resistance for the AUD/USD pair is to the downside. In the absence of any relevant market-moving economic data, any attempted bounce will now be seen as a selling opportunity and remain capped near the 50-day SMA support breakpoint.

Technical levels to watch

AUD/USD

Overview
Today last price0.6843
Today Daily Change-0.0036
Today Daily Change %-0.52
Today daily open0.6879
 
Trends
Daily SMA200.6999
Daily SMA500.6886
Daily SMA1000.6703
Daily SMA2000.6806
 
Levels
Previous Daily High0.6936
Previous Daily Low0.6841
Previous Weekly High0.7011
Previous Weekly Low0.6856
Previous Monthly High0.7143
Previous Monthly Low0.6688
Daily Fibonacci 38.2%0.6877
Daily Fibonacci 61.8%0.69
Daily Pivot Point S10.6835
Daily Pivot Point S20.679
Daily Pivot Point S30.6739
Daily Pivot Point R10.693
Daily Pivot Point R20.6981
Daily Pivot Point R30.7025

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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