- AUD/USD struggled to preserve/capitalize on its early move to a one-week high.
- Rising geopolitical tensions acted as a headwind for the perceived riskier aussie.
- Retreating US bond yields undermined the USD and could help limit the downside.
The AUD/USD pair surrendered its intraday gains to a one-week high and was last seen hovering near the lower end of its daily trading range, around the 0.7120-15 region.
The pair built on this week's strong recovery from the lowest level since November 2020 and gained some follow-through traction during the early part of the trading action on Wednesday. The uptick was supported by a modest US dollar weakness, though lacked follow-through buying and ran out of steam ahead of mid-0.7100s.
Relations between the US and Russia took a turn for the worse after US President Joe Biden threatened to impose economic and other measures on Russia if it invades Ukraine. This, in turn, kept a lid on the recent optimistic move in the financial markets and acted as a headwind for the perceived riskier Australian dollar.
Meanwhile, reviving safe-haven demand led to a fresh leg down in the US Treasury bond yields, which undermined the US dollar and helped limit the downside for the AUD/USD pair. That said, the prospects for a faster policy tightening by the Fed support prospects for the emergence of some USD dip-buying and warrant caution for bulls.
The markets have been pricing in the possibility for an eventual Fed liftoff in May 2022 amid worries about the persistent rise in inflationary pressures. Hence, the focus shifts to the release of the US CPI report on Friday, which will influence the Fed's policy outlook and provide a fresh directional impetus to the AUD/USD pair.
In the meantime, the US bond yields will drive the USD demand and produce some short-term trading opportunities around the AUD/USD pair. Apart from this, traders will further take cues from geopolitical developments and the broader market risk sentiment amid absent relevant market moving economic releases from the US.
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 clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.