- The AUD / SUD faces rejection near the 100-day SMA for the second day in a row on Tuesday.
- A bearish RBA and cautious sentiment act as a headwind for the higher perceived risk AUD.
- Expectations of a rate hike from the Fed continue to prop up the USD and limit the pair’s gains.
The pair AUD/USD remains on the defensive during Tuesday’s European session, staying under pressure near the lower end of its daily range around the region of 0.7335.
The pair gained some positive traction during the early part of the trading action on Tuesday, although it struggled to capitalize on the move and once again faced rejection near the 100-day SMA barrier. Concerns about a faster-than-expected rise in inflationary pressures continued to weigh on investor sentiment. This was evident by the cautious mood around the stock markets, which in turn acted as a headwind for the perceived riskier Aussie.
Apart of this, the pessimistic outlook of the Reserve Bank of Australia they worked even more to limit the rise of the AUD / USD pair. In the minutes of its November meeting released today, the RBA reiterated that the cash rate will remain at its current level until 2024 or until the wage and inflation criteria are met. Additionally, RBA Governor Philip Lowe said the latest data and forecasts do not justify an increase in the cash rate in 2022.
Secondly, US dollar held firm near 16-month high touched the day before amid prospects for an early tightening of monetary policies by the Fed. In fact, markets have been pricing in price. the possibility of an eventual Fed rate hike by July 2022 and Fed fund futures indicate a high probability of another rate hike for November. That said, the pullback in US Treasury yields prevented USD bulls from opening aggressive positions.
Investors also preferred to wait on the sidelines before the release of monthly US retail sales figures on Tuesday. The combination of factors, in turn, helped limit any significant declines for the AUD / USD pair, at least for the moment. The data, along with US bond yields and speeches from a number of FOMC members, will influence the USD and provide further boost to the AUD / USD pair at the start of the American session.
AUD / USD technical levels
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