- AUD/USD gains positive traction for the second day in a row amid renewed dollar selling.
- Expectations of a less aggressive Fed rate hike and falling US bond yields weigh on the dollar.
- COVID-19 jitters in China could act as a headwind for the pair ahead of Powell’s speech.
The pair AUD/USD it draws some buying for the second day in a row on Wednesday and holds its gains through the first half of the European session. The pair is currently near the upper end of its daily range, around the region of 0.6720-0.6725and continues to be supported by new selling around the US dollar.
The prospects for less aggressive Fed tightening and expectations for a relatively smaller 50 basis point rate hike in December put some pressure on US Treasury yields. This, along with signs of stability in financial markets, weighs on the safe-haven US dollar, and offers support to the risk-sensitive Aussie. The intraday rise, meanwhile, appears unaffected by softer Australian consumer inflation and Chinese PMI numbers.
The Australian Bureau of Statistics has reported that the National Consumer Price Index (CPI) rose 6.9% in the 12 months prior to October, below consensus estimates of a reading of 7.4%. This was seen as a sign that inflation may be peaking, which could mean that interest rates will not have to rise as much as expected. On the other hand, official data from China showed that manufacturing and service sector activity contracted to seven-month lows in November.
However, these disappointing data were seen offset by speculation that the Chinese government will ease its strict covid-zero policies to prevent further protests. That said, concerns about economic headwinds from a new COVID-19 outbreak in China should dampen market optimism. This, in turn, could prevent traders from entering bullish positions on the AUD/USD pair ahead of Fed Chairman Jerome Powell’s scheduled speech.
Investors will look for further clues on the future path of rate hikes, which will weigh on the dollar and give the AUD/USD pair some momentum. Meanwhile, traders will follow the US economic calendar on Wednesday, which will include ADP’s private sector employment report, Q3 GDP flash report and job openings data. JOLTS. This, coupled with broader risk sentiment, could create some short-term opportunities.
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.
