- AUD/USD struggles to preserve its intraday gains amid the emergence of some USD dip-buying.
- Aggressive Fed rate hike bets, elevated US bond yields continue to act as a tailwind for the buck.
- The cautious mood further benefits the safe-haven USD and weighs on the risk-sensitive aussie.
The AUD/USD pair surrenders a major part of its intraday gains and slips below the 0.6500 psychological mark, back closer to the daily low during the first half of the European session.
A combination of supporting factors helps to revive the US dollar demand, which, in turn, keeps a lid on the AUD/USD pair's early positive move closer to the 0.6550 supply zone. The recent hawkish remarks by several Fed officials reaffirmed expectations that the US central bank will tighten its monetary policy at a faster pace. In fact, the markets have been pricing in the possibility of another supersized 75 bps Fed rate hike move in November. This remains supportive of elevated US Treasury bond yields and acts as a tailwind for the buck. Apart from this, the prevalent cautious market mood further underpins the safe-haven greenback and contributes to capping the risk-sensitive aussie.
The market sentiment remains fragile amid concerns that rapidly rising borrowing costs will lead to a deeper global economic downturn. Adding to this, the risk of a further escalation in the Russia-Ukraine conflict tempers investors' appetite for riskier assets. This, along with the Reserve Bank of Australia's (RBA) decision to slow the pace of policy tightening and raise interest rates by 25 bps earlier this week, seems to weigh on the Australian dollar. The fundamental backdrop seems tilted in favour of bearish traders and suggests that the path of least resistance for the AUD/USD pair is to the downside. Hence, any attempted recovery move runs the risk of fizzling out quickly.
Traders, however, might refrain from placing aggressive bets and prefer to move to the sidelines ahead of the closely-watched US monthly employment details, due for release on Friday. The popularly known NFP report will play a key role in influencing Fed rate hike expectations. The outlook should help determine the next leg of a directional move for the greenback and the AUD/USD pair. In the meantime, traders on Thursday will take cues from the US Weekly Initial Jobless Claims data. Apart from this, speeches by influential FOMC members and the US bond yields will drive the USD demand. This, along with the broader risk sentiment, will be looked upon for short-term trading 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
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.