- Sustained USD buying dragged AUD/USD to the lowest level since early October.
- Hawkish Fed expectations, the risk-off impulse acted as a tailwind for the buck.
- Investors look forward to the US macro data/FOMC minutes for a fresh impetus.
The AUD/USD pair was seen hovering near the lowest level since early October, with bears awaiting a sustained break below the 0.7200 mark heading into the North American session.
Following a brief consolidation through the early part of the trading action on Wednesday, the US dollar regained traction and shot to a fresh 16-month peak amid hawkish Fed expectations. The USD bulls seemed rather unaffected by retreating US Treasury bond yields, instead took cues from the risk-off impulse in the financial markets.
This was evident from a generally weaker tone in the equity markets, which benefitted the greenback's relative safe-haven status and drove flows away from the perceived riskier aussie. Apart from this, the divergence in monetary policy stance between the Reserve Bank of Australia and the Fed further contributed to the AUD/USD pair's ongoing decline.
Meanwhile, Wednesday's downfall could further be attributed to some technical selling following the recent break below support marked by the lower boundary of an upward sloping channel. Some follow-through selling below the 0.7200 mark will reaffirm the negative bias and turn the AUD/USD pair vulnerable to slide further towards the 0.7165 support.
Market participants now look forward to the US economic docket, highlighting the release of the Prelim (second estimate) US Q3 GDP, Durable Goods Orders and Core PCE Price Index. The key focus, however, will be on the FOMC meeting minutes, which will play a key role in driving the greenback in the near term and provide a fresh directional impetus to the AUD/USD pair.
Technical levels to watch
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