- AUD/USD reverses an intraday slide below 0.6900 amid modest USD decline.
- Expectations of a hawkish Fed will cap the USD’s decline and cap the pair amid risk-off sentiment.
- Also, investors would prefer to wait for the US CPI release on Tuesday.
The pair AUD/USD attracts some buyers near the 0.6890 zone and recovers around 40 pips from the four-day low reached earlier this Monday. The pair rises to the 0.6930 zone, a new daily high at the start of the European session and for now, seems to have stopped last week’s pullback from levels just above 0.7000.
The US dollar fails to capitalize on its intraday gains amid a modest drop in US Treasury yields. and it turns out to be a key factor that lends some support to the AUD/USD pair. That being said, the prospects for further tightening of monetary policy by the Fed should help limit the fall of the dollar. This, coupled with the current risk off environment, warrants caution before positioning in favor of any significant rise in the risk sensitive AUD.
Several FOMC members, including Fed Chairman Jerome Powell, stressed last week the need for further increases in interest rates to fully control inflation. Expectations were boosted by annual revisions to CPI data released Friday by the Labor Department, which showed consumer prices rose in December instead of falling as previously estimated. Besides, One-year inflation expectations from the University of Michigan survey rose to 4.2% in February.
This increases the risk of inflation rising in January and reaffirms expectations that the Fed will maintain its hawkish stance. This, in turn, could curb bearish expectations around the USD ahead of the release of the latest US consumer inflation figures due on Tuesday. This, in turn, suggests that the path of least resistance for the AUD/USD pair is to the downside and any further move higher could still be seen as a selling opportunity.
No major US economic data will be released on Monday, leaving the dollar at the mercy of US bond yields. The speech by the governor of the Fed, Michelle Bowman, which will take place first thing in the North American session, will serve as a reference. This, along with broader risk sentiment, could influence USD price dynamics and help create short-term opportunities around the AUD/USD pair.
AUD/USD technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
