- The risk-off impulse dragged the perceived riskier aussie to over a one-year low on Tuesday.
- COVID-19 jitters took its toll on the global risk sentiment and triggered a selloff in equities.
- Declining US bond yields weighed heavily on the USD and helped limit losses for the major.
The AUD/USD pair trimmed a part of its intraday losses to the lowest level since November 2020 and was last seen trading around the 0.7115 region, down 0.20% for the day.
Concerns about the potential economic fallout from the spread of a new vaccine-resistant variant – Omicron – triggered a fresh wave of the global risk-aversion trade. This was evident from a sharp fall in the equity markets, which, in turn, was seen as a key factor that drove flows away from the perceived riskier aussie. The AUD/USD pair dropped to sub-0.7100 levels, though the heavily offered tone surrounding the US dollar helped limit further losses, at least for the time being.
The latest developments surrounding the coronavirus saga now seemed to have dashed market expectations for an early policy tightening by the Fed. This, along with the global flight to safety, triggered a steep decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond dropped to a three-week low, back closer to the 1.45% threshold, and weighed heavily on the greenback. This, in turn, assisted the AUD/USD pair to recover around 25-30 pips.
That said, any meaningful upside still seems elusive amid a more dovish stance adopted by the Reserve Bank of Australia. Moreover, the AUD/USD pair's inability to attract buyers suggests that the near-term bearish trend witnessed over the past one month or so is still far from being over. Hence, attempted recovery moves might still be seen as a selling opportunity and run the risk of fizzling out rather quickly near the 0.7155-60 supply zone, or weekly high set in the previous day.
Market participants now look forward to the US economic docket, highlighting the release of Chicago PMI and the Conference Board's Consumer Confidence Index during the early North American session. The key focus, however, will be on Fed Chair Jerome Powell's testimony before the Senate Banking Committee. Powell's remarks will influence expectations about the Fed's next policy move and drive the USD demand, which, in turn, might produce short-term trading opportunities around the AUD/USD pair.
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
AUD/USD stands firm above 0.6500 with markets bracing for Aussie PPI, US inflation
The Aussie Dollar begins Friday’s Asian session on the right foot against the Greenback after posting gains of 0.33% on Thursday. The AUD/USD advance was sponsored by a United States report showing the economy is growing below estimates while inflation picked up. The pair traded at 0.6518.
EUR/USD mired near 1.0730 after choppy Thursday market session
EUR/USD whipsawed somewhat on Thursday, and the pair is heading into Friday's early session near 1.0730 after a back-and-forth session and complicated US data that vexed rate cut hopes.
Gold soars as US economic woes and inflation fears grip investors
Gold prices advanced modestly during Thursday’s North American session, gaining more than 0.5% following the release of crucial economic data from the United States. GDP figures for the first quarter of 2024 missed estimates, increasing speculation that the US Fed could lower borrowing costs.
Ethereum could remain inside key range as Consensys sues SEC over ETH security status
Ethereum appears to have returned to its consolidating move on Thursday, canceling rally expectations. This comes after Consensys filed a lawsuit against the US SEC and insider sources informing Reuters of the unlikelihood of a spot ETH ETF approval in May.
Bank of Japan expected to keep interest rates on hold after landmark hike
The Bank of Japan is set to leave its short-term rate target unchanged in the range between 0% and 0.1% on Friday, following the conclusion of its two-day monetary policy review meeting for April. The BoJ will announce its decision on Friday at around 3:00 GMT.