- AUD / USD captures some traction on Wednesday and recovers some of the previous day’s losses.
- A pullback in US bond yields keeps USD bulls on the defensive amid improving risk sentiment.
- The prospects for an early rate hike by the Fed should help limit losses around the USD and limit the pair’s gains.
The pair AUD / USD maintains its modest intraday gains at the start of the European session on Wednesday, trading at the time of writing near its daily highs around the region of 0.7250.
The pair has managed to capture some buying during the early part of the trading action on Wednesday and is recovering some of the losses from the previous day. The US dollar has been consolidating the strong advance of the previous day to the highest level since November 2020 amid a modest pullback in US Treasury yields. Besides this, a slight improvement in global risk sentiment has weighed further on the safe-haven US dollar and has offered some support to the perceived riskier Australian dollar.
That said, concerns about the potential risks of the debt crisis in China from Evergrande Group, along with the intensification of the energy crisis in Europe and China they could limit the bullish movement of the pair. Apart from this, prospects for an early tightening of monetary policies by the Fed they should act as a tailwind for the USD. The combination of factors, in turn, could constrain the AUD / USD pair, justifying some caution for aggressive bulls and before positioning for any significant bullish movement.
It is worth remembering that the Fed hinted that it will soon begin to reduce its asset purchases and the dotted chart indicated the authorities’ inclination to raise rates in 2022. Expectations were bolstered by comments from a number of influential FOMC members. Additionally, Fed Chairman Jerome Powell, who testified before the Senate Banking Committee, said inflation is more concerning than it was earlier this year, which could add to the recent upward pressure on US bond yields. .
Market participants are now awaiting remarks from Fed Chairman Jerome Powell at the ECB Forum on Central Banking later in the US session. This, coupled with US bond yields, could influence USD price dynamics and provide some boost to the AUD / USD pair. Investors will take more indications of the broader market risk sentiment for some short-term trading opportunities around the pair.
AUD / USD technical levels
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