- Covid-19 nervousness weighed on AUD / USD for the second day in a row on Monday.
- A sharp drop in US bond yields weighs on the USD and could help limit the decline.
The pair AUD/USD moves with a negative bias during the European session on Monday, extending the recent drop to the region of 0.7330.
The pair has extended the retracement of the previous day from near the 0.7400 level and has moved lower for the second day in a row amid risk aversion in the markets. Concerns about the possible economic consequences of the Delta variant The fast-spreading coronavirus has weighed on investors’ appetite for riskier assets. This has been evident by a weaker tone around equity markets, which has been seen as a key factor in driving away the perceived riskier Australian dollar cash flows.
Meanwhile, the global flight to safe haven has unleashed a sharp decline in US Treasury yields. In fact, the yield on the 10-year US government bond has reversed a significant part of last week’s gains to the 1.30% level. This, in turn, triggered some new selling around the US dollar and offered some support to the AUD / USD pair. Aside from this, investors’ reluctance to open aggressive positions ahead of the FOMC meeting could also help limit the pair’s losses.
The Fed is expected to announce its latest monetary policy decision during the American session on Wednesday. The result will play a key role in influencing short-term USD price dynamics and providing new directional momentum to the AUD / USD pair. Meanwhile, events surrounding the coronavirus saga will fuel broader market risk sentiment and allow investors to seize some short-term opportunities.
AUD / USD technical levels
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