- A combination of factors triggered new selling around AUD / USD on Tuesday.
- Rising US bond yields, risk aversion boosted the safe-haven dollar.
- A sustained break below the 0.7220 support will set the stage for further losses.
The pair AUD/USD it remained depressed heading into the American session and was last seen hovering around the daily lows, just below 0.7250.
The pair struggled to capitalize on its modest intraday rally, instead encountered new offers near the 0.7310 region and has now reversed the positive move of the previous day. The US dollar followed a strong bullish move in US Treasury yields and soared to the highest level since August 20. This, in turn, was seen as a key factor that put downward pressure on the AUD / USD pair.
Indeed, the benchmark 10-year US government bond yield reached its highest level since June 17 amid prospects for an early tightening of policy by the Fed. It is worth remembering that the Fed It hinted last week that it would start rolling back its massive pandemic-era stimulus as early as November. Furthermore, the dot plot pointed to the inclination of lawmakers to raise interest rates in 2022.
Aside from this, the risk aversion momentum in the markets provided an additional boost to the safe haven dollar and further affected the perceived riskier Aussie. Investors remain concerned about the potential risks of the debt crisis in China Evergrande. This, along with a sell-off in the money markets and the intensification of the energy crisis, took its toll on global risk sentiment.
With the last leg down, the AUD / USD pair has now approached strong horizontal support near the 0.7220 region. A sustained advance, leading to a subsequent decline below 0.7200, will be seen as a further trigger for bearish traders. This, in turn, will set the stage for further losses and allow bearish traders to challenge the yearly lows, around the 0.7100 level.
Market participants are now looking forward to Fed Chairman Jerome Powell’s testimony before the Senate Banking Committee. This will be accompanied by the publication of the Conference Board Consumer Confidence Index. Aside from this, US bond yields, along with broader market risk sentiment, will influence the USD and provide some boost to the AUD / USD pair.
Technical levels
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