- AUD/USD rises for the third day in a row and hits a new monthly high.
- Dovish comments from Fed Chairman Powell keep the dollar depressed and offer some support.
- China’s problems with COVID-19 turn out to be the only factor limiting the pair’s gains.
The pair AUD/USD gains traction for the third day in a row on Thursday and maintains its bullish tone through the first half of the European session. However, the pair pared some of its intraday gains and fell back to the 0.6790/0.6810 zone.
The US dollar remains weak near a multi-month low following dovish comments from the chairman of the Federal Reserve, Jerome Powell, and acts as a tailwind for the AUD/USD. In fact, Powell sent a clear message that the US central bank would soften his stance and said it was time to ease the pace of interest rate hikes. This led to a further decline in US Treasury yields and continues to weigh on the dollar.
Apart from this, the positive tone around equity markets is seen as another factor undermining the safe haven dollar and benefiting the Australian currency. AUD/USD bulls continued to take as reference the slight improvement in the manufacturing PMI for China, which unexpectedly rose to 49.4 in November from 49.2 the previous month. However, the reading marks the fourth consecutive monthly contraction amid a broad slowdown due to COVID-19 restrictions.
This could dampen any bullish moves in the markets and act as a headwind for the AUD/USD pair. That being said, the underlying bearish sentiment surrounding the USD, coupled with a sustained break through the horizontal resistance at 0.6755-0.6765, supports prospects for further gains. Therefore, cany significant pullback below 0.6800 could be considered a buying opportunity.
Market participants are watching Thursday’s US economic calendar, which highlights the release of the Fed’s preferred inflation gauge – the core personal consumption spending price index – and the ISM manufacturing PMI. This, along with US bond yields and general risk sentiment, will influence dollar and AUD/USD price dynamics.
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.
