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AUD/USD remains heavily offered below 0.6900 mark amid stronger USD, risk-off mood

  • AUD/USD meets with a fresh supply on Tuesday and reverses a major part of the overnight gains.
  • Hawkish Fed expectations, geoploitics and recession fears boost the USD and weigh on the risk-sensitive Aussie.
  • Hawkish-sounding RBA minutes fail to impress bulls.

The AUD/USD pair comes under some renewed selling pressure on Tuesday and reverses a major part of the previous day's positive move. The pair remains depressed below the 0.6900 mark through the first half of the European session. 

The negative price action falls in line with the dominant short-term downtrend, evidenced in the albeit volatile declining peaks and troughs since the February 1 highs, which suggests the wind is behind bears, and more downside is, on balance, more likely than upside. 

A combination of factors weighs on the AUD/USD pair: the US Dollar is being pushed higher by the prospects for further policy tightening by the Federal Reserve which is triggering a fresh leg up in the US Treasury bond yields and continuing to underpin the Greenback.

Geopolitical risks eminating from the Russia-Ukraine conflict and US-China political manouveuring as well as softer equities further benefits the safe-haven buck and drives flows away from the risk-sensitive Aussie.

Market sentiment remains fragile amid growing worries about economic headwinds stemming from rapidly rising borrowing costs which are also tempering investors' appetite for riskier assets of which the Aussie is one. 

Benefiting the buck is the fact that markets now seem convinced that the US central bank will stick to its hawkish stance and have been pricing in at least a 25 bps lift-off at the next two FOMC meetings in March and May.

This was reaffirmed by the US CPI and PPI data last week, which showed that inflation isn't coming down quite as fast as hoped. Furthermore, a slew of FOMC members stressed the need to keep lifting rates gradually to tame inflation.

Perhaps Fed hawkishness is overshadowing a more hawkish tilt from the recently released Reserve Bank of Australia (RBA) meeting minutes, as these failed to tempt bulls or lend any support to the AUD/USD pair.

In fact, the RBA minutes showed that the Australian central bank had considered raising interest rates by 50 bps during its February meeting, though eventually settled on a 25 bps hike.

The board of the Reserve Bank of Australia also agreed that more interest rate hikes are needed over the coming months to bring down inflation.

Yet this has had little impact on the AUD/USD pair which is unable to attract any buyers and suggests that the recent pullback from a multi-month top is far from being over.

Market participants now look to the US economic docket, featuring the release of flash PMI prints and Existing Home Sales data later on Tuesday. This, along with the US bond yields and the broader risk sentiment, could influence the USD price dynamics and provide some impetus to the AUD/USD pair.

The focus, however, will remain glued to the latest FOMC meeting minutes, which will play a key role in determining the near-term trajectory.

Technical levels to watch

AUD/USD

Overview
Today last price0.6875
Today Daily Change-0.0038
Today Daily Change %-0.55
Today daily open0.6913
 
Trends
Daily SMA200.6989
Daily SMA500.6891
Daily SMA1000.6711
Daily SMA2000.6805
 
Levels
Previous Daily High0.6921
Previous Daily Low0.6862
Previous Weekly High0.703
Previous Weekly Low0.6812
Previous Monthly High0.7143
Previous Monthly Low0.6688
Daily Fibonacci 38.2%0.6898
Daily Fibonacci 61.8%0.6885
Daily Pivot Point S10.6877
Daily Pivot Point S20.6841
Daily Pivot Point S30.6819
Daily Pivot Point R10.6935
Daily Pivot Point R20.6957
Daily Pivot Point R30.6993

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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