- A combination of factors triggered new selling around AUD / USD on Thursday.
- The weaker risk tone benefited the dollar as a safe haven and pushed flows away from the Australian dollar.
- The Fed’s dovish expectations limited the rise in the USD and could help limit further losses.
The pair AUD/USD It maintained its offered tone during the early North American session, although it managed to bounce a few pips from around 0.7250 or weekly lows.
Following the previous day’s attempted recovery move and a subsequent pullback from the 0.7330 region, the pair encountered fresh offers on Thursday despite upbeat Australian job details. A softer risk tone benefited the relative safe-haven status of the US dollar and was seen as a key factor driving away flows from the perceived riskier Aussie.
Optimism about a possible vaccine for the highly contagious coronavirus diseases was overshadowed by concerns about the continued rise in new infections and its impact on the fragile global economic recovery. This, in turn, dampened investors’ appetite for riskier assets, which was evidenced by weaker business sentiment around equity markets.
The USD remained high after the release of disappointing macroeconomic data from the US In fact, initial weekly US unemployment claims rose to 742,000 during the week ending November 14. The reading was well above consensus estimates, pointing to a modest drop to 707,000 from the 711,000 upward revision the previous week. Separately, the Philadelphia Fed manufacturing index fell to 26.3 in November from 32.3
That said, concerns about the economic consequences of the imposition of new COVID-19 restrictions in several US states fueled speculation about additional monetary easing by the Fed. This, coupled with the ongoing decline in US Treasury yields, prevented USD bulls from making aggressive bets and limited deeper losses for the AUD / USD pair.
Therefore, it will be prudent to wait for a strong follow-up sell before confirming that the recent strong rally from levels below 0.7000 has been exhausted and positioned for any further depreciation movement.
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