AUD / USD falls to new daily lows and approaches the 0.7600 level

• A modest pickup in USD demand triggers some selling around AUD / USD on Tuesday.
• The optimistic US economic outlook and softer risk tone offer support to the safe-haven USD.
• The fall in US bond yields limits the rise of the USD and helps limit the pair’s losses, at least for now.

The pair AUD/USD is moving lower during the European session on Tuesday, falling to the daily lows zone just above the 0.7600 level.

The pair has had Difficulty capitalizing on post-RBA rally to one-week highs and has faced rejection near the 0.7660-65 resistance zone amid a modest rally in demand for the US dollar. The AUD / USD pair has had a slight rise earlier this Tuesday after the RBA left the cash rate unchanged at 0.1% and it will sound a bit optimistic in the attached monetary policy statement.

The support factor has been offset by the appearance of some purchases around the USD, which has been supported by the optimistic US economic outlook Investors remain optimistic about the prospects for a relatively faster US economic recovery amid the impressive pace of coronavirus vaccination and the Biden administration’s infrastructure spending plan.

Apart of this, a softer tone around US stock index futures has further benefited the safe-haven USD and it has moved away the monetary flows of the Australian dollar of greater perceived risk. That said, the current retracement drop in US Treasury yields has limited the rise of the USD and has helped limit any further losses for the AUD / USD pair, at least for the time being.

Meanwhile, reflation trading has been fueling speculation about a pickup in US inflation and has generated doubts the Fed will keep interest rates ultra-low for a longer period. This should limit any significant drop in US bond yields and further prop up the US dollar, supporting prospects for further short-term weakness in the AUD / USD pair.

There is no major economic data release on Tuesday. Therefore, US bond yields and overall market risk sentiment will play a key role in influencing USD price dynamics. This should allow investors to seize some short-term opportunities ahead of the key release of the minutes from the FOMC’s monetary policy meeting on Wednesday.

AUD / USD technical levels