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AUD/USD off lows, on the defensive below mid-0.7300s

  • AUD/USD witnessed some selling during the Asian session, though lacked follow-through.
  • A softer risk tone turned out to be a key factor that undermined the perceived riskier aussie.
  • A subdued USD price action helped limit losses ahead of the US CPI report/FOMC minutes.

The AUD/USD pair extended the previous day's late pullback from over one-month tops and continued losing ground through the Asian session on Wednesday. The pair dropped to two-day lows, around the 0.7330 region in the last hour, albeit lacked follow-through selling.

The pullback lacked any obvious fundamental catalyst and could be attributed to some profit-taking amid the prevalent cautious mood, which tends to drive flows away from the perceived riskier aussie. Worried about a faster than expected rise in inflation and signs of a slowdown in the global economic recovery have been fueling concerns about stagflation. Apart from this, fears of a spillover from China Evergrand's debt crisis continued weighing on investors' sentiment.

However, the recent widespread rally in commodity prices continued acting as a tailwind for the resource-linked Australian dollar. This, along with a subdued US dollar price action, extended some support to the AUD/USD pair. The ongoing retracement slide in the US Treasury bond yields turned out to be a key factor that kept the USD bulls on the defensive. That said, hawkish Fed expectations should help limit any meaningful downfall for the greenback, at least for now.

Investors seem convinced that the Fed will begin rolling back its massive pandemic-era stimulus as soon as November. The markets have also started pricing in the possibility of an interest rate hike amid risks that the continued surge in crude oil/energy prices will stoke inflation. Hence, the market focus will be on Wednesday's release of the US consumer inflation figures. This will be followed by the FOMC meeting minutes later during the US trading session.

This would play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the AUD/USD pair. In the meantime, the US bond yields and the broader market risk sentiment will be looked upon for some short-term trading opportunities.

Technical levels to watch

AUD/USD

Overview
Today last price0.7342
Today Daily Change-0.0009
Today Daily Change %-0.12
Today daily open0.7351
 
Trends
Daily SMA200.7277
Daily SMA500.7306
Daily SMA1000.7423
Daily SMA2000.7576
 
Levels
Previous Daily High0.7385
Previous Daily Low0.7332
Previous Weekly High0.7339
Previous Weekly Low0.7226
Previous Monthly High0.7478
Previous Monthly Low0.717
Daily Fibonacci 38.2%0.7352
Daily Fibonacci 61.8%0.7365
Daily Pivot Point S10.7327
Daily Pivot Point S20.7302
Daily Pivot Point S30.7273
Daily Pivot Point R10.738
Daily Pivot Point R20.7409
Daily Pivot Point R30.7434

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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