- AUD/USD builds on last week’s bounce and gains traction for the second day in a row.
- The pullback in US bond yields and the positive risk tone weaken the dollar and extend support.
- Recession fears could hold back the risk-sensitive Aussie ahead of Tuesday’s US CPI release.
The pair AUD/USD gets some offers for successive consecutive day on Monday and is based on last week’s bounce from levels below 0.6700 or the lowest since July 14. It is also the third day of positive movement in the previous four and lifts spot prices to a maximum of more than one week, approaching 0.6900 during the middle of the European session.
A combination of factors is forcing the US dollar to prolong its recent sharp pullback from two-decade highs, which, in turn, is seen as support for the AUD/USD pair. Markets already seem to have priced in a 75 basis point rate hike by the Federal Reserve at the next monetary policy meeting on September 20-21. Additionally, a slight decline in US Treasury yields appears to weigh on the USD.
Aside from this, the generally positive tone in equity markets further undermines the safe-haven dollar and benefits the risk-sensitive Aussie. That said, growing recession fears, amid prospects for faster policy tightening by major central banks and economic headwinds stemming from new COVID-19 restrictions in China could dampen optimism. . This, in turn, warrants some caution on the part of bullish traders.
Investors may also refrain from making aggressive bets and prefer to stay on the sidelines ahead of the latest US consumer inflation figures due out on Tuesday. The crucial August CPI report in the US will play a key role in influencing the Fed’s policy outlook. This will boost near-term dollar demand and help determine the next leg of a directional move for the AUD/USD pair.
Meanwhile, the pair is more likely to consolidate in a range in the absence of market-relevant economic releases from the US on Monday. That said, US bond yields coupled with broader risk sentiment could give the dollar some lift and allow traders to take advantage of short-term opportunities around the AUD/USD pair.
Technical levels
Source: Fx Street
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