- AUD/USD attracts some buyers on Tuesday amid a weaker USD.
- China’s woes with COVID-19 and dovish Fed expectations could limit USD losses.
- The RBA governor’s comments fail to impress bulls or provide any momentum.
The pair AUD/USD achieves some positive traction on Tuesday and recovers some of the previous day’s decline to one-week lows. The pair maintains its buying tone throughout the first half of the European session and is currently near the daily high, around the region of 0.6650.
The US dollar halts its recent strong rally from the lowest level since August 12 and is trending lower on Tuesday, which in turn is seen offering some support for the AUD/USD pair. Nevertheless, the fundamental background seems to continue to lean in favor of dollar bulls. Therefore, any further move higher could be seen as an opportunity to initiate a new bearish position around the pair and runs the risk of fading rather quickly.
Market sentiment remains fragile amid the concern about economic headwinds from a new outbreak of COVID-19 in China and the imposition of new closures in several cities. Furthermore, the fear of a new escalation of the conflict between Russia and Ukraine affects global risk sentiment. This is evident from the softer tone in equity markets, which should act as a tailwind for the safe-haven US dollar and cap the risk-sensitive Aussie.
Furthermore, signals from Fed officials suggest that the US central bank is far from stopping its rate hike cycle, which should give more support to the dollar. For his part, the Governor of the Reserve Bank of Australia (RBA), Philip Lowe said on Tuesday that the central bank could return to 50 basis point moves or keep rates unchanged for a while.. This, along with the worsening COVID-19 situation in China, validates the bearish outlook for the AUD/USD pair.
Market participants are now awaiting the release of the US Richmond Manufacturing Index. Also, traders will follow Cleveland Fed President Loretta Mester’s speech. This, along with broader market risk sentiment, will influence USD price action and allow traders to take advantage of some short-term opportunities around the AUD/USD pair.
AUD/USD technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
