AUD / USD falls to daily lows around 0.7710 amid a rebound in USD demand

  • A combination of factors triggers new selling around AUD / USD on Tuesday.
  • Vaccine fears hurt investor sentiment and weigh on AUD’s perceived higher risk.
  • A sudden spike in US bond yields benefits the USD and adds to the pair’s selling bias.

The pair AUD/USD has broken its intraday consolidation range and has fallen to new daily lows, around region 0.7710, at the start of the European session on Tuesday.

Following a rather subdued reaction to the release of the RBA meeting minutes, the pair has seen some new selling and has come under pressure from a combination of factors. Investors have become cautious after the suspension of the Oxford / AstraZeneca coronavirus vaccine in several European countries. This has acted as a key headwind for the higher perceived risk Australian dollar.

On the other hand, the US dollar has remained underpinned by prospects for a relatively faster US economic recovery. Apart from this, a sudden spike in US Treasury yields has provided an additional boost to the USD. This has been seen as a key factor behind the last downward movement of the AUD / USD pair in the last hour.

The optimistic economic outlook for the United States has been reinforced by the approval of a massive $ 1.9 trillion stimulus package. Reflation trading has fueled speculation about a possible spike in US inflation, which in turn has driven the benchmark 10-year government bond yield above 1.60%, near the highs of more than a year touched last week.

Despite the setback, the pair AUD / USD remains within the trading range of the previous day. Investors now seem reluctant to open aggressive positions ahead of this week’s main risk event: the FOMC’s monetary policy meeting. That said, sustained weakness below the 0.7700 level is likely to pave the way for a further intraday decline.

Meanwhile, market participants will wait for the release of US monthly retail sales data. to get a boost at the start of the American session. This, along with US bond yields and broader market risk sentiment, will influence USD price dynamics and could lead to some trading opportunities around the AUD / USD pair.

AUD / USD technical levels

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