Australian Dollar: AUD/USD plummets below 0.6600 as mood dampened, buoyant US Dollar

The Australian Dollar (AUD) fell for the fourth straight day in a risk-off mood after news broke that the latest China Covid-19 outbreak caused three deaths during the weekend, as authorities eased some restrictions. Hence, speculators seeking safety bolstered the US Dollar (USD) amid growing concerns about reimposing lockdowns. The AUD/USD is trading at 0.6590 after hitting a daily high of 0.6683.

Sentiment bolstered the US Dollar on safe-haven flows

Wall Street denotes investors’ worries about China being hit by a Covid outbreak, extending its losses in the day. A light economic calendar in the United States (US) witnessed the Chicago National Activity index falling to negative territory in October, to -0.05 from 0.17 in September. Although the US October CPI and PPI reports were softer-than-expected, a solid US Retail Sales report increased the chances that the Fed will continue tightening monetary conditions.

During the last week, a slew of Federal Reserve (Fed) officials expressed the need to ease the pace of interest rate hikes but mentioned that they’re not pausing. St. Louis Fed President James Bullard said rates are not “sufficiently restrictive” and foresees the Federal Funds rate (FFR) to peak at around 5% to 6%.

The Atlanta Fed President Raphael Bostic noted that the supports slowing the rhythm of interest-rate increases and foresees 75 to 100 bps additional tightening to the FFR.

Elsewhere, the US Dollar Index (DXY), a measure of the buck’s value against a basket of six currencies, climbs sharply by 0.80%, at 107.823, a headwind for the Australian Dollar.

Aside from this, an absent Australian economic calendar leaves AUD/USD traders leaning on market sentiment, battered by China‘s news. It should be noted that the People’s Bank of China (PBoC) kept the Loan Prime Rate (LPR) unchanged at 3.65%, while Iron Ore prices added another piece of the puzzle that is weighing on the Australian Dollar.

Ahead into the week, the Reserve Bank of Australia (RBA) Governor Philip Lowe will cross wires on Tuesday, delivering a speech at the Annual Committee for Economic Development of Australia Dinner. He is expected to reiterate the RBA’s commitment to tame inflation, though it is not likely to rock the boat. On the US front, the economic calendar will feature the Richmond Fed Manufacturing Index alongside further Fed speaking.

AUD/USD Key Technical Levels