- Renewed USD buying interest prompted some fresh selling around AUD/USD on Tuesday.
- The Fed’s hawkish shifts, the overnight rally in the US bond yields underpinned the USD.
- A softer risk tone further weighed on the perceived riskier aussie ahead of Powell’s testimony.
The AUD/USD pair refreshed daily lows in the last hour, with bears making a fresh attempt to extend the downward trajectory below the key 0.7500 psychological mark.
The pair failed to capitalize on the previous day's modest recovery move from six-month lows, instead met with some fresh supply in the vicinity of the very important 200-day SMA. Following a modest pullback on Monday, the US dollar was back in demand and remained well supported by the Fed's sudden hawkish turn last week. This, in turn, was seen as a key factor that exerted some fresh downward pressure on the GBP/USD pair.
It is worth recalling that the Fed surprised investors at the end of June policy meeting and brought forward its timetable for the first post-pandemic interest rate hikes. The so-called dot plot pointed to two rate hikes by the end of 2023 as against policymakers projection for no increase until 2024 in the March meeting. This, along with the overnight solid rebound in the US Treasury bond yields, further underpinned the greenback.
Adding to this, a generally softer tone around the equity markets also benefitted the greenback's relative safe-haven status and acted as a headwind for the perceived riskier aussie. With the latest leg down, the AUD/USD pair has now eroded a major part of the overnight gains and seems vulnerable to slide further. That said, slightly overstretched conditions warrant some caution before placing aggressive bearish bets.
Market participants now look forward to the US economic docket – featuring the second-tier releases of Existing Home Sales and Richmond Manufacturing Index. The key focus, however, will remain on the Fed Chair Jerome Powell's testimony before the House Select Subcommittee on the Coronavirus Crisis. Apart from this, the US bond yields will influence the US price dynamics and allow traders to grab some 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
EUR/USD climbs to 10-day highs above 1.0700
EUR/USD gained traction and rose to its highest level in over a week above 1.0700 in the American session on Tuesday. The renewed US Dollar weakness following the disappointing PMI data helps the pair stretch higher.
GBP/USD extends recovery beyond 1.2400 on broad USD weakness
GBP/USD gathered bullish momentum and extended its daily rebound toward 1.2450 in the second half of the day. The US Dollar came under heavy selling pressure after weaker-than-forecast PMI data and fueled the pair's rally.
Gold struggles around $2,325 despite broad US Dollar’s weakness
Gold reversed its direction and rose to the $2,320 area, erasing a large portion of its daily losses in the process. The benchmark 10-year US Treasury bond yield stays in the red below 4.6% following the weak US PMI data and supports XAU/USD.
Here’s why Ondo price hit new ATH amid bearish market outlook Premium
Ondo price shows no signs of slowing down after setting up an all-time high (ATH) at $1.05 on March 31. This development is likely to be followed by a correction and ATH but not necessarily in that order.
Germany’s economic come back
Germany is the sick man of Europe no more. Thanks to its service sector, it now appears that it will exit recession, and the economic future could be bright. The PMI data for April surprised on the upside for Germany, led by the service sector.