- A combination of factors triggers new selling around AUD / USD on Wednesday.
- Risk aversion sentiment is seen as a key factor weighing on the higher perceived risk AUD.
- A strong recovery in US bond yields benefits the USD and adds to the pair’s sell bias.
- The market’s attention remains on the release of the minutes from Wednesday’s FOMC meeting.
The pair AUD/USD it extends its intraday losses and falls to two-day lows, below the 0.7750 level, during the first half of the European session on Wednesday.
Having struggled to find acceptance above the 0.7800 level the previous day, the pair has seen under strong selling pressure on Wednesday And it has come under pressure from a combination of factors. A decline in commodity prices Commodities have acted as a drag on the Australian dollar, a currency tied to commodity prices. This, along with a sharp decline in global stock markets, has moved monetary flows away from the Australian dollar and increased perceived risk.
In the meantime, risk aversion sentiment has driven some safe haven flows to the US dollar, which has received an added boost from a good recovery in US Treasury yields. This has been seen as another factor that has put some downward pressure on the AUD / USD pair. Having said that, pessimistic expectations from the Fed could limit any significant rise for the USD and help limit deeper losses in the pair, at least for the moment.
Given the Fed’s stubbornly pessimistic view that any increase in inflation will be transitory, investors have been lowering their expectations of a tightening of their monetary policy earlier than expected. Therefore, the key focus of attention will remain on the minutes of the last FOMC monetary policy meeting, which will play a key role in driving the USD short-term and could generate some significant trading opportunities around the AUD / USD pair. .
Apart from this, investors will also focus on Thursday’s release of Australia’s monthly jobs report. This could influence market expectations as to whether the RBA would start to reduce some of its emergency stimulus measures, which, in turn, should help determine the next directional move for the AUD / USD pair.
AUD / USD technical levels
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