- AUD/USD pulls back from two-week high hit early Monday amid a stronger dollar.
- The Fed’s dovish outlook coupled with cautious sentiment benefits the safe-haven USD.
- Rising commodity prices offer some support to the AUD and help limit deeper losses.
The pair AUD/USD moves lower during the European session on Monday, pulling back from a fresh two-week high of 0.7425 played earlier in the day. At time of writing, the pair falls to daily lows around the 0.7380 level.
The pair saw a modest retracement from a two-week high around the 0.7425 region touched earlier this Monday and for now, appears to have snapped a four-day winning streak. Cautious market sentiment was seen as a key factor acting as a headwind for the Australian dollar. higher perceived risk. This coupled with the appearance of some buying around the US dollar put some downward pressure on the AUD/USD pair.
Despite hopes for a peace deal to end the war in Ukraine, investors remain on the sidelines amid heavy aerial bombardment of the capital kyiv by Russian forces. This, in turn, capped the recent bullish move in the markets and benefited the safe-haven US dollar, which strengthened further on aggressive Fed outlook. In fact, the Fed has indicated it may raise rates at the remaining six meetings in 2022.
Furthermore, comments from influential FOMC members coupled with soaring US Treasury yields further inspired USD bulls. St. Louis Fed President James Bullard explained why he voted for a 50 basis point rate hike, saying on Friday that the central bank’s reputation was at stake if action was not taken urgently enough.
Additionally, Fed Governor Christopher Waller noted that the war in Ukraine was the reason he did not push for a 50 basis point rate hike, but that was definitely on the table for the next few meetings. This helped the benchmark 10-year US government bond yield hold steady just below the highest level since June 2019.
That said, higher commodity prices could offer some support to the Australian dollar, a currency linked to commodity prices, and limit losses for the AUD/USD pair. In addition, investors could also refrain from opening aggressive positions and prefer to wait for the scheduled speech by Fed chairmanJerome Powell, which will take place later in the American session this Monday.
AUD/USD technical levels
Source: Fx Street
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