- AUD/USD finds itself aggressively bid on Monday amid a strong rally in dollar demand.
- Fed expectations remain supportive of rising US bond yields and underpinning the dollar.
- The risk-positive tone is also neither beneficial to the risk-sensitive Aussie nor does it lend support to the pair.
The AUD/USD pair is under fresh selling pressure and is down more than 100 points from levels just above 0.6400, or a two-week high hit earlier this Monday. The pair is trading below the 0.6300 round level during the first half of the European session and is supported by a strong rally in demand for the US dollar.
Despite reports that some Fed officials are signaling further discomfort with oversized rate hikes, markets seem convinced that the US central bank will stay on its path of monetary policy tightening. This, in turn, continues to support rising US Treasury yields and helps the dollar regain strong positive traction on the first day of a new week.
The Australian dollar, on the other hand, is pressured by headwind concerns stemming from China’s zero COVID policy, overshadowing optimism in Chinese Q3 GDP, which showed the world’s second-largest economy expanding. 3.9% year-on-year. Furthermore, Chinese industrial production increased by 6.3% year-on-year in September, against the 4.5% estimate.
Even the risk-positive tone does not support the risk-sensitive Aussie. Meanwhile, the Reserve Bank of Australia (RBA) decided earlier this month to slow the pace of monetary policy tightening. This suggests that the path of least resistance for the AUD/USD pair is to the downside and any recovery attempts could still be seen as a selling opportunity.
Market Participants now await preliminary US PMI data to be released later in the early American session. The data, coupled with US bond yields and broader risk sentiment, could influence dollar price dynamics and provide some lift to the AUD/USD pair.
Technical levels to watch
Source: Fx Street
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