- AUD/USD falls to nearly a month lows pressured by a combination of factors.
- Dovish RBA minutes, coupled with risk aversion, weigh on the risk-sensitive Aussie.
- The weakening USD offers support, although the trend seems to be in favor of the pair’s bears.
The pair AUD/USD it has been heavily sold after an initial rally to the 0.6745 area and fell to almost a month low on Tuesday. However, the pair manages to bounce a few pips and remains stable around the 0.6650 area at the beginning of the European session.
The Australian dollar began to lose ground after the Reserve Bank of Australia (RBA) minutes showed that policy makers considered leaving interest rates unchanged at December meeting. Aside from this, the Bank of Japan-inspired AUD/JPY slide, along with a prolonged sell-off in the stock markets, help to move away the flows of the Aussie, sensitive to risk. That being said, a weaker US dollar helps limit the fall in the AUD/USD pair, at least for now.
The intraday drop in the USD, meanwhile, could be attributed to aggressive buying around the Japanese yen, although a combination of factors should help limit further declines. Concern that an increase in COVID-19 cases in China may delay a broader reopening in the country casts a shadow over optimism over the easing of strict lockdown measures. This, coupled with a hawkish comment from the Fed, should support the safe-haven dollar and limit any attempt to recover the AUD/USD pair.
It should be remembered that the US central bank indicated that will continue to raise rates to squash inflation. In addition, policymakers expect borrowing costs to rise by at least 75 basis points by the end of 2023. This, in turn, pushes up US Treasury yields and favors USD bulls, suggesting that the path of least resistance for AUD/USD is to the downside. Furthermore, a break below the support of the 100-day SMA reinforces the negative outlook for the pair.
No major US economic data will be released on Tuesday. Therefore, US bond yields, along with broader risk sentiment, will play a key role in influencing USD price dynamics and provide some momentum to the AUD/USD pair. Apart from this, the COVID-19 situation in China should allow traders to take advantage of some short-term opportunities.
AUD/USD technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
