- AUD/USD falls for the second consecutive day on the appearance of new purchases around the dollar.
- Recession fears weigh on global risk sentiment and benefit the dollar as a haven.
- Investors are now waiting for the US economic data to have new opportunities in the short term.
The pair AUD/USD has attracted some sellers for the second day in a row on Thursday and has pulled back further from three-week highs around the 0.6930 region hit the previous day. At the time of writing, the pair has fallen to a new daily low around the 0.6860 area during the first half of the European session.
A change in global risk sentimentas evidenced by the appearance of new sales on the stock markets, helped the safe haven US dollar to regain positive traction. In fact, the dollar index is now looking to ride on the previous day’s bounce from a two-week low, which in turn put downward pressure on the AUD/USD pair.
Market sentiment remains fragile amid the concern that rapidly rising borrowing costs and the war between Russia and Ukraine will challenge global economic growth. Apart from this, the imposition of strict COVID-19 controls in China fueled fears of a recession and weighed on investor sentiment, denting the perceived riskier AUD.
Apart of this, the high yield of US Treasury bonds, reinforced by aggressive expectations regarding the Fed, turned out to be another factor that supported the dollar. Although expectations of a massive 100 basis point interest rate hike in July have subsided, investors seem convinced that the Fed will be forced to make a bigger hike this year to curb rising inflation. .
On the other hand, Reserve Bank of Australia policy meeting minutes released on Tuesday indicate further rate hikes will be needed to bring inflation back to target over time. This could give some support to the Aussie and limit deeper AUD/USD losses, warranting caution on the bears.
Therefore, it would be wise to wait for a strong follow-up of the selling before confirming that the recent strong bounce from the 0.6680 area, or a two-year low, is exhausted. Going forward, US economic data such as the Philadelphia Fed Manufacturing Index and jobless claims could give the AUD/USD pair a lift early in the American session today.
AUD/USD technical levels
Source: Fx Street
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