- AUD/USD stages an intraday bounce from sub-0.6700 levels at the level of a major trend line.
- Retreating US bond yields force the USD to consolidate its recent gains to a two-decade high.
- A positive risk tone also undermines the bucks and offers support to the risk-sensitive aussie.
The AUD/USD pair recovers its intraday losses to sub-0.6700 levels and climbs to the top end of its daily range during the first half of the European session. The pair is currently trading around the 0.6730-0.6735 region, though any meaningful recovery still seems elusive.
The US dollar now seems to have entered a bullish consolidation phase amid a modest pullback in the US Treasury bond yields. This, along with a positive risk tone undermines the safe-haven greenback and offers some support to the risk-sensitive aussie. That said, growing worries about a deeper economic downturn should keep a lid on any optimistic move in the markets. Apart from this, hawkish Fed expectations might continue to act as a tailwind for the buck and cap any attempted recovery for the AUD/USD pair.
Investors seem convinced that the US central bank will tighten its monetary policy more aggressively to tame inflation and have been pricing in a 75 bps rate hike at the September meeting. Moreover, the prospects for rapid interest rate hikes, along with the economic headwinds stemming from fresh COVID-19 curbs in China and the ongoing war in Ukraine, have been fueling recession fears. This, in turn, suggests that the path of least resistance for the AUD/USD pair is to the downside and attempted recovery could get sold into.
Technically, the pair has been in a medium-term downtrend which began at the start of August and so the bias remains to the downside, despite looking a little over extended. Bullish day traders may have capitalized on the bounce off of the major trend line connecting the April and June 2022 highs touched earlier today, but whether and for how long this key support level will hold remains in doubt, especially given the bearish backdrop. The YTD lows at 0.6670 are the next target to the downside and also likely to offer some temporary pushback. A slide below there, however, would open up the chart ripe for a bearish field day.
There isn't any major market-moving economic data due for release from the US on Wednesday. Hence, the focus will be on speeches by Fed officials later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. Apart from this, traders might take cues from the broader risk sentiment to grab short-term opportunities around the major.
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 stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.