- AUD/USD remains under some selling pressure for the second straight day on Tuesday.
- The RBA offered little cues about the future rate-hike path and weighs on the Aussie.
- The risk-off mood benefits the safe-haven USD and contributes to the intraday decline.
The AUD/USD pair extends the overnight retracement slide from the vicinity of the 0.6700 mark, or over a four-month high and drifts lower for the second straight day on Tuesday. The downward trajectory drags spot prices to over a one-week low, around the 0.6570 region during the early European session and is sponsored by a combination of factors.
The Australian Dollar (AUD) weakens across the board after the Reserve Bank of Australia (RBA) decided to keep interest rates unchanged and noted that more economic cues are needed before considering any more changes to monetary policy. In the accompanying policy statement, the RBA noted that the monthly CPI indicator for October suggested that inflation is continuing to moderate and conditions in the labour market, though remaining tight, also continued to ease gradually. This suggested that additional rate hikes might be off the table, which, along with a weaker risk tone, weighs heavily on the risk-sensitive Aussie.
Investors remain concerned about a darkening global outlook and the worsening economic conditions in China. Apart from this, an attack on US vessels in the Red Sea over the weekend, which fueled worries about a broader conflict in the Middle East, took its toll on the global risk sentiment. This, to a larger extent, overshadows Tuesday's better-than-expected release of Caixin China Services PMI, showing that business activity grew at a faster pace in November. This, however, failed to impress the AUD bulls, with a modest US Dollar (USD) uptick further contributing to the offered tone surrounding the AUD/USD pair.
The anti-risk flow is seen as a key factor benefitting the Greenback's relative safe-haven status, though dovish Federal Reserve (Fed) expectations might cap any further gains. Market participants seem convinced that the US central bank is done with its policy-tightening campaign and are pricing in an even chance of the first-rate cut as soon as March 2024. This, along with the global flight to safety, drags the US Treasury bond yields low and might hold back the USD bulls from placing aggressive bets ahead of the US macro data. The mixed fundamental backdrop, meanwhile, warrants caution for the AUD/USD bears.
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 maintains its bullish bias near 1.1500, Fed eyed
EUR/USD advances modestly on Fed-day, hovering around the 1.1500 zone against the backdrop of a tepid retracement in the US Dollar. Market participants, in the meantime, remain cautious ahead of the Fed’s interest rate decision later in the European evening.
GBP/USD looks consolidative around 1.3450, Dollar stays offered
GBP/USD now seems to have embarked on a consolidative range in the mid-1.3400s as investors continue to digest the recently released UK inflation data, while the soft performance of the Greenback so far underpins Cable’s daily uptick.
Gold extends its sidelined mood around $3,400 prior to the FOMC event
Gold trades with a positive bias and now appears flat near the $3,400 mark per troy ounce on Wednesday. Rising geopolitical tensions in the Middle East, along with continuing trade-related uncertainty, continue to weigh on market confidence and help the precious metal contain its losses ahead of the Fed rate announcement.
Federal Reserve expected to stand pat as markets look for hints of potential interest rate cuts
Market participants widely anticipate the US central bank to leave policy settings unchanged for the fourth consecutive meeting, after cutting the interest rate by 25 basis points (bps) to the 4.25%-4.50% range in December.
Bitcoin, Ethereum and XRP defend key support on sixth day of Israel-Iran war, what to expect
Bitcoin (BTC), Ethereum (ETH), and XRP are holding steady above key support levels. The top three cryptocurrencies have weathered the geopolitical tension and macroeconomic events of the past week.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.