- AUD / USD saw some selling on Wednesday and broke four days of the winning streak.
- A strong follow-up on the USD buy, the risk reduction momentum weighed on the Australian perceived as more risky.
- The better-than-expected US ADP report continued to support the offered tone surrounding the USD.
The pair AUD/USD remained depressed in the face of the American session, although it has managed to recover a few pips from the weekly lows touched earlier this Wednesday. The pair was last seen trading in the mid-0.7200 and moved shortly after the release of the US ADP report.
Having struggled to find acceptance above 0.7300, the AUD / USD pair witnessed strong selling on Wednesday and broke four consecutive days of the winning streak. A combination of factors pushed the US dollar closer to one-year highs and put downward pressure on the pair.
Investors appear to be convinced that the Fed will begin reducing its massive pandemic-era stimulus as early as November. Markets may also have begun to assess prospects for a rate hike in 2022 amid concerns that the recent surge in crude oil and energy prices will fuel inflation.
The combination of factors pushed the yield on the 10-year US government bond to the highest level since June. This coupled with the risk appetite boost in the markets provided an additional boost to the safe haven dollar and further pushed out flows from the perceived riskier Australian dollar.
The USD held firm, although it had a rather subdued reaction to the upbeat ADP report, which showed an addition of 568,000 private sector jobs in September. This was well above the 428,000 forecast and the prior month’s revised downward reading of 340,000 and could have raised expectations from Friday’s NFP report.
However, the fundamental backdrop appears to tilt firmly in favor of bearish traders and supports the prospects for a further depreciation move for the AUD / USD pair. Therefore, any attempt at a recovery move could still be seen as a selling opportunity and runs the risk of quickly disappearing.