- AUD/USD is consolidating in a range near the one-month low hit on Tuesday.
- A modest recovery in equity markets offers support for the risk-sensitive Aussie.
- The Fed’s aggressive expectations act as a tailwind for the dollar and continue to limit gains.
The pair AUD/USD struggles for significant traction and swings between tepid gains and small losses during the first half of the European session. The pair is currently in neutral territory around the 0.6875 area, just a few pips above a one-month low hit earlier this Tuesday.
The dollar retreats from two-decade highs amid a softer tone around US Treasury yields. In addition, the recovery of confidence in global risk, which is reflected in the change in the trend of the stock markets, reinforces the value of the dollar as a safe haven. This turns out to be a key factor offering some support to the AUD/USD pair, although the recovery attempt lacks bullish conviction.
Growing concerns about a slowing global economy are curbing any upbeat moves in the markets and acting as a headwind for the risk-sensitive Aussie. Furthermore, firm expectations that the Federal Reserve will continue to tighten monetary policy to curb inflation should help limit any deeper corrective slide in the dollar. The factors mentioned above should help limit the gains for the AUD/USD pair, which warrants caution for the bulls.
Investors may also be reluctant to make aggressive bets, preferring to stay on the sidelines ahead of Fed Chairman Jerome Powell’s speech at the Jackson Hole symposium later this week. Investors will be looking for clues about the possibility of a 75 basis point rate hike at the FOMC meeting in September. This, coupled with important macro data from the US, will boost dollar demand and help determine the short-term path of the AUD/USD pair.
Meanwhile, Tuesday’s US economic docket, which includes PMI data, New Home Sales and the Richmond Manufacturing Index, could provide some lift later in the early North American session. Aside from this, broader risk sentiment could influence USD price dynamics and allow traders to take advantage of short-term opportunities around the AUD/USD pair.
Technical levels
Source: Fx Street
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