AUD / USD remains below 0.7200 level ahead of Powell

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  • Upbeat Australian retail sales help AUD / USD regain positive traction on Tuesday.
  • A pullback in US bond yields triggers some selling around the USD and provides an additional boost to the pair.
  • The bulls are struggling to break above the 0.7200 level before Powell’s nomination hearing.

The pair AUD/USD moves higher during the European session on Tuesday, although it appears to have difficulty capitalizing on the move and remains below the 0.7200 level.

After the previous day’s slide from the mentioned level, the AUD / USD pair attracted new purchases on Tuesday and was supported by a combination of factors. The Australian dollar got some support from upbeat national retail sales data, which posted stronger than expected growth for the second month in a row in November.

What’s more, the country’s trade balance data showed that imports increased 6% during the reported month and they reaffirmed strong domestic demand. On the other hand, the current drop in US Treasury yields kept the US dollar bulls on the defensive. This was seen as another factor that provided additional boost to the AUD / USD pair.

Despite the supporting factors, the rally lacked bullish conviction and the AUD / USD pair, so far, has struggled to break above the 0.7200 level. The prospects for a faster tightening of monetary policies by the Fed They benefited the USD, which in turn prevented investors from opening aggressive bullish positions and limited any significant gains in the pair.

It is worth mentioning that the money markets have fully priced in the possibility of an eventual first rate hike by the Fed in March and they anticipate four rate hikes in 2022. Therefore, the focus will remain on Fed Chairman Jerome Powell’s nomination hearing later during the American session, which could offer new clues as to the timing and pace of monetary policy normalization.

Apart from this, investors will also take cues from the release of the latest US consumer inflation figures on Wednesday. This will play a key role in influencing short-term USD price dynamics and will provide further directional momentum to the AUD / USD pair. Meanwhile, broader market risk sentiment could generate some short-term business opportunities.

AUD / USD technical levels

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