- AUD/USD witnessed some selling on Tuesday and was pressured by a combination of factors.
- Recession fears underpinned the safe-haven USD and weighed on the perceived riskier aussie.
- RBA’s hawkish signal might help limit deeper losses ahead of the US PMIs and Powell’s speech.
The AUD/USD pair came under some renewed selling pressure on Tuesday and eroded a part of the previous day's positive move to a two-and-half-week high. The pair remained on the defensive through the early European session and was last seen trading near the daily low, around the 0.7075-0.7070 region.
The latest optimism led by the loosening of COVID-19 lockdowns in China faded rather quickly amid the worsening global economic outlook. Investors remain worried that a more aggressive move by major central banks to curb soaring inflation could pose challenges to the global economy. Adding to this, the Russia-Ukraine war and the latest COVID-19 outbreak in China have been fueling recession fears. This, in turn, triggered a fresh wave of the global risk-aversion trade, which assisted the safe-haven US dollar to stage modest recovery from the monthly low and weighed on the risk-sensitive aussie.
The greenback was further underpinned by expectations that the US central bank would need to take more drastic action to bring inflation under control. Hence, the focus will remain glued to Fed Chair Jerome Powell's speech later this Tuesday and the latest FOMC meeting minutes, scheduled for release on Wednesday. Given that a 50 bps rate hike move over the next two meetings is fully priced in, market participants will look for clues about the possibility of a jumbo 75 bps rate hike in June. This will influence the USD price dynamics and provide a fresh directional impetus to the AUD/USD pair.
In the meantime, the Australian dollar might draw support from the Reserve Bank of Australia's hawkish signal and help limit deeper losses for the AUD/USD pair. This, in turn, warrants some caution before placing aggressive bearish bets. Traders now look forward to the release of the global PMI prints, which will drive the broader market risk sentiment. Apart from this, the USD price dynamics would also contribute to producing short-term opportunities.
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 pressured as Fed officials hold firm on rate policy
The Australian Dollar is on the defensive against the US Dollar, as Friday’s Asian session commences. On Thursday, the antipodean clocked losses of 0.21% against its counterpart, driven by Fed officials emphasizing they’re in no rush to ease policy. The AUD/USD trades around 0.6419.
EUR/USD extends its downside below 1.0650 on hawkish Fed remarks
The EUR/USD extends its downside around 1.0640 after retreating from weekly peaks of 1.0690 on Friday during the early Asian session. The hawkish comments from Federal Reserve officials provide some support to the US Dollar.
Gold price edges higher on risk-off mood hawkish Fed signals
Gold prices advanced late in the North American session on Thursday, underpinned by heightened geopolitical risks involving Iran and Israel. Federal Reserve officials delivered hawkish messages, triggering a jump in US Treasury yields, which boosted the Greenback.
Dogwifhat price pumps 5% ahead of possible Coinbase effect
Dogwifhat price recorded an uptick on Thursday, going as far as to outperform its peers in the meme coins space. Second only to Bonk Inu, WIF token’s show of strength was not just influenced by Bitcoin price reclaiming above $63,000.
Billowing clouds of apprehension
Thursday marked the fifth consecutive session of decline for US stocks as optimism regarding multiple interest rate cuts by the Federal Reserve waned. The downturn in sentiment can be attributed to robust economic data releases, prompting traders to adjust their expectations for multiple rate cuts this year.