- AUD/USD pulled back from 1-month highs on fresh dollar buying.
- The risk-averse environment benefited the safe-haven dollar and weighed on the risk-sensitive Aussie.
- Traders are watching US consumer confidence data for some lift ahead of the Australian CPI.
The pair AUD/USD it is retracing from one-month highs, around the 0.6980-0.6985 area touched on Tuesday. The emergence of fresh US dollar purchases proved to be a key factor putting downward pressure and dragging the pair towards 0.6900 during the early American session.
Market sentiment remains fragile amid growing concerns about a potential global recession. This, coupled with pre-Fed jitters, dampened investors’ appetite for perceived riskier assets. This was evident in the weaker tone in equity markets, which boosted safe-haven demand for the US dollar and weighed on the risk-sensitive Aussie.
The global flight to safety, meanwhile, caused a sharp intraday drop in US Treasury yields, which could hold back the dollar and support the AUD/USD pair. Investors may also prefer to stay on the sidelines ahead of this week’s US macroeconomic data and Wednesday’s expected FOMC monetary policy decision.
A fairly busy week in terms of major US economic releases begins with the Conference Board’s consumer confidence index on Tuesday. However, attention will turn to the outcome of the FOMC’s two-day policy meeting. The Fed is expected to raise interest rates by another 75 basis points, leaving the door open for further policy tightening.
As for central bank risk, traders will look to Australia’s quarterly consumer inflation figures due in the Asian session on Wednesday. Also notable on this week’s US economic docket is the Durable Goods Orders release on Wednesday and the second quarter GDP flash report on Thursday.
This, coupled with the US Personal Consumption Expenditure (PCE) report – the Fed’s preferred gauge of inflation – due out on Friday, will weigh on the dollar and give AUD/USD a further boost. . In the meantime, traders may refrain from making aggressive bets, warranting caution before confirming that the recent move higher has run out.
Technical levels
Source: Fx Street
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