- A combination of factors triggers new selling around AUD / USD on Monday.
- Powell’s upbeat comments benefit the USD, while a softer risk tone weighs on the AUD.
- The emergence of lower buying warrants some caution for aggressive bears.
The pair AUD/USD remains under pressure at the start of the European session on Monday, although has managed to bounce around 20 pips from the daily lows. At the time of writing, the pair is trading around the 0.7610 region, shedding 0.15% on the day.
The pair has seen some selling on the first day of a new trading week and has come under pressure from a combination of factors. The US dollar has found some support in the optimistic comments of the Fed chairman, Jerome Powell. This, along with a slight deterioration in global risk sentiment has further boosted some safe-haven monetary flows to the US dollar and has weighed on the higher perceived risk Aussie dollar.
During an interview with 60 Minutes, Powell said the US economy is ready for a turnaround and higher growth should create more jobs. This reinforced the Market expectations of a relatively faster US economic recovery from the pandemic, thanks to the impressive rate of vaccination against the coronavirus and the infrastructure spending plan of more than 2 trillion dollars of the president and the USA, Joe Biden.
Powell further added that the Fed wants inflation moderately above 2% for some time, but you don’t want it to materially rise above 2%. It is worth mentioning that reflation trading has fueled speculation about a possible spike in inflation in the US and raised doubts that the Fed will keep interest rates ultra-low for a longer period, which has also acted. like a tailwind for the USD.
The news that one of the Iran’s nuclear facilities have been hit by a terrorist act has weighed on investors’ appetite for riskier assets and benefited traditional safe-haven assets such as the USD. Despite the negative factors, the AUD / USD pair has once again shown some resistance below the 0.7600 level. This, in turn, warrants some caution before positioning for any further downside movement in the short term.
Even from a technical perspective, the pair AUD / USD has been swinging into a wider range for the past three weeks. This also makes it prudent to wait for a sustained breakout in either direction to confirm the short-term trajectory. Market focus will remain on the release of the latest US consumer inflation figures, scheduled for Tuesday.
AUD / USD technical levels
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