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AUD / USD extends corrective decline from multi-month highs and retreats towards 0.7480

  • AUD / USD is witnessing a turnaround from multi-month highs hit earlier this Thursday.
  • Risk aversion benefits the safe-haven USD and triggers some profit-taking in the AUD / USD.
  • A strong continuation sell is needed to confirm that the pair has already hit a high.

The pair AUD / USD extends its corrective pullback from multi-month highs and weakens further below the key psychological level of 0.7500 during the European session on Thursday. At time of writing, the pair is trading near daily lows, around the 0.7480 region and losing 0.50% on the day.

The pair has struggled to capitalize on its initial positive move to the highest level since July and has witnessed an intraday shift from the 0.7535 region. Risk aversion in the markets has helped the safe-haven US dollar stage a nice rebound from three-week lows and sparked some profit-taking around the AUD / USD pair.

Concerns about the possible contagion from the Evergrande debt crisis in China They have resurfaced after the heavily indebted developer said Wednesday that a $ 2.6 billion stake in its real estate services unit fell through. This, in turn, tempered investors’ appetite for higher perceived risk assets and benefited traditional safe-haven currencies such as the USD.

The US dollar has seen further supported by high yields on US Treasuries., which did not seem affected by the moderation of expectations of a rate hike from the Fed. The sad US macroeconomic releases this week (industrial production and housing market data) have pointed to a weakening of economic activity and have tempered market expectations for an early tightening of monetary policies by the Fed.

This has been further reinforced by comments the day before from Fed Governor Randal Quarles, saying that it would be premature to start raising interest rates given the high inflation that is likely to recede next year. Quarles, however, reaffirmed that it is time for the Fed to start pulling its massive bond-buying program from the pandemic era.

From a technical perspective, Thursday’s drop could still be attributed to some profit taking after the recent strong rally since the end of September. This makes it prudent to wait for a strong continuation sell before confirming that the AUD / USD pair has found a short-term high and positioning for any further bearish movements.

Market participants are now awaiting the US economic calendar, which includes the Philadelphia Fed Manufacturing Index releases and initial weekly jobless claims. This, coupled with a timed speech by Fed Governor Christopher Waller and US bond yields, could influence USD price dynamics and generate some momentum for the AUD / USD pair.

AUD / USD technical levels

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