AUD/USD Clings to Intraday Gains Above 0.6600, Upside Potential Looks Limited

  • AUD/USD attracts some buying on Thursday amid a modest USD pullback from a multi-month high.
  • A combination of factors should benefit the USD and limit any significant rise in the pair.
  • The RBA’s subdued reversal also suggests that the path of least resistance for the pair is to the downside.

The pair AUD/USD makes up ground on Thursday and moves away from the lows of almost four months, around the 0.6570-0.6565 area touched the previous day. The pair maintains its buying tone during the first half of the European session and is currently near the daily high, comfortably above the 0.6600 level.

The US dollar (USD) falls from three-month highs and turns out to be a key factor driving the AUD/USD pair higher. Meanwhile, the USD slide lacks an obvious fundamental catalyst and more likely to remain restrained amid expectations of more aggressive Fed tightening. In fact, markets are pricing in a 50 basis point hike at the upcoming FOMC policy meeting on March 21-22, and these expectations were bolstered by hawkish comments from Fed Chairman Jerome Powell.

On the second day of his appearance before the US Congress, Powell reiterated Wednesday that interest rates would have to rise and possibly faster to control stubbornly high inflation. This remains supportive of high US Treasury yields and supports the prospect of some buying around the dollar. In addition, the prevailing caution could help cap losses in the safe-haven USD and cap gains in the risk-sensitive AUD.

Market sentiment remains fragile in light of the concern about economic difficulties stemming from rapidly rising borrowing costs. Besides, loss of optimism about China’s economic recovery reduces investor appetite for riskier assets. This, along with the dovish rate of the Reserve Bank of Australia earlier this week, signaling that it may be nearing the end of its rate hike cycle, warrants bulls’ caution before positioning for any further AUD/USD move higher.

Market participants now await the US economic calendar, with the release of Challenger job cuts data and the usual weekly initial jobless claims data later in the American session. This, along with US bond yields and broader risk sentiment, should influence USD price action and give the AUD/USD pair some momentum. However, attention will remain focused on the US monthly employment report, popularly known as NFP, which is due to be released on Friday.

AUD/USD technical levels to watch

AUD/USD

Overview
Last price today 0.6614
Today I change daily 0.0020
today’s daily variation 0.30
today’s daily opening 0.6594
Trends
daily SMA20 0.6811
daily SMA50 0.6893
daily SMA100 0.676
daily SMA200 0.6784
levels
previous daily high 0.6629
previous daily low 0.6568
Previous Weekly High 0.6784
previous weekly low 0.6695
Previous Monthly High 0.7158
Previous monthly minimum 0.6698
Fibonacci daily 38.2 0.6606
Fibonacci 61.8% daily 0.6591
Daily Pivot Point S1 0.6565
Daily Pivot Point S2 0.6536
Daily Pivot Point S3 0.6504
Daily Pivot Point R1 0.6626
Daily Pivot Point R2 0.6658
Daily Pivot Point R3 0.6687

Source: Fx Street

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