- AUD/USD moves lower for the third day in a row amid sustained buying interest around the USD.
- The Fed’s dovish outlook and high US bond yields continue to benefit the USD.
- A sustained break below 0.7450 will set the stage for further short-term losses.
The US dollar has attracted fresh buying during the early European session on Friday, dragging the pair down AUD/USD to a low of almost two weeks, around the region of 0.7460 in the last hour.
After a brief consolidation during the first half on Friday, the AUD/USD pair found fresh selling and moved into negative territory for the third day in a row. The Fed’s dovish outlook propelled the US dollar index DXY at its highest level since May 2020which in turn was seen as a key factor putting downward pressure on AUD/USD.
It is worth remembering that the March FOMC minutes released on Wednesday showed that the authorities were willing to raise interest rates by 50 basis points at upcoming meetings. Furthermore, there was general agreement on massive Fed balance sheet reduction as soon as next month. This, coupled with high yields on US Treasuries, continued to benefit the USD.
The prospect of more aggressive tightening of monetary policy by the Fed comes amid concerns that the recent rise in commodity prices would further push up consumer inflation. The combination of factors helped US bond yields hold steady near multi-year highs, favoring USD bulls and setting the stage for further AUD/USD losses.
Even from a technical perspective, acceptance below the psychological level of 0.7500 and a subsequent move to 0.7450 will suggest that the AUD/USD has established a short-term top. Further down, the corrective pullback could drag the pair towards the 0.7400 level en route to the next relevant support near the 0.7375-0.7370 region.
AUD/USD technical levels
Source: Fx Street
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