- AUD/USD regained positive traction on Friday and climbed back above the 0.6900 mark.
- The risk-on impulse prompted some USD selling and benefitted the risk-sensitive aussie.
- Fed rate hike bets, growing recession fears could limit the USD losses and cap the major.
The AUD/USD pair attracted some buying on the last day of the week and moved further away from over a one-week-low touched on Thursday. The pair maintained its bid tone through the mid-European session and was last seen hovering near the top end of its daily range, around the 0.6915 region.
A significant decline in commodity prices this week seems to have eased fears about the persistent rise in inflationary pressures and boosted investors' sentiment. This was evident from the risk-on impulse across the global equity markets, which, in turn, prompted some selling around the safe-haven US dollar and benefitted the risk-sensitive aussie.
That said, the worsening global economic outlook could keep a lid on any optimistic move in the markets. Investors remained sceptical that major central banks would be able to hike interest rates to curb soaring inflation without affecting the growth. The fears were further fueled by Thursday's disappointing release of the Eurozone PMI prints for June.
Apart from this, expectations that the Fed would retain its policy tightening path and deliver another 75 bps rate hike in July should act as a tailwind for the USD. Fed Chair Jerome Powell, in his second day of Congressional testimony on Thursday, reaffirmed market bets and stressed an unconditional commitment to taming inflation, even amid risks to growth.
The fundamental backdrop makes it prudent to wait for strong follow-through buying before confirming that the AUD/USD pair has formed a near-term bottom and positioning for any further gains. Market participants now look forward to a scheduled speech by St. Louis Fed President James Bullard, which along with second-tier US macro data, might influence the USD.
Friday's US economic docket features the release of the revised Michigan Consumer Sentiment Index and New Home Sales data. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities around the AUD/USD pair.
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
GBP/USD stays below 1.2450 after UK employment data
GBP/USD trades marginally lower on the day below 1.2450 in the early European session on Tuesday. The data from the UK showed that the ILO Unemployment Rate in February rose to 4.2% from 4%, weighing on Pound Sterling.
EUR/USD steadies above 1.0600, awaits German ZEW and Powell speech
EUR/USD is holding above 1.0600 in the European morning on Tuesday, having hit fresh five-month lows. The pair draws support from sluggish US Treasury bond yields but the rebound appears capped amid a stronger US Dollar and risk-aversion. Germany's ZEW survey and Powell awaited.
Gold price holds steady below $2,400 mark, bullish potential seems intact
Gold price oscillates in a narrow band on Tuesday and remains close to the all-time peak. The worsening Middle East crisis weighs on investors’ sentiment and benefits the metal. Reduced Fed rate cut bets lift the USD to a fresh YTD top and cap gains for the XAU/USD.
SOL primed for a breakout as it completes a rounding bottom pattern
Solana price has conformed to the broader market crash, following in the steps of Bitcoin price that remains in the red below the $65,000 threshold. For SOL, however, the sensational altcoin could have a big move in store.
Key economic and earnings releases to watch
The market’s focus may be on geopolitical issues at the start of this week, but there is a large amount of economic data and more earnings releases to digest in the coming days.