- A combination of factors dragged AUD / USD lower for the fourth consecutive session on Thursday.
- The worsening COVID-19 situation and risk-scared mood weighed on the Aussie perceived as riskier.
- The Fed’s phase-down plan acted as a tailwind for the dollar and also contributed to the slide.
The pair AUD/USD it maintained its strongly offered tone through the middle of the European session and was last seen trading just above 0.7150, or the lowest level since early November.
The pair extended this week’s bearish breakout momentum below the 0.7300 congestion zone and lost ground for the fourth consecutive session on Thursday. Australia suffered its worst day since the start of the pandemic amid a surge in cases infected by the highly contagious delta variant of the coronavirus. This, coupled with the prevailing foreclosure risk environment, weighed heavily on the Australian perceived as riskier.
In addition to the COVID-19 nerves, expectations that the Fed will begin to reduce its asset purchases later this year further affected global risk sentiment. It’s worth remembering that the July 27-28 FOMC Meeting Minutes released on Wednesday revealed policymakers’ assessment that progress was made toward maximum goals for employment and price stability. This, in turn, provided a strong boost to the US dollar.
In fact, the key USD index broke past previous highs and soared to new year-to-date highs. This was seen as another factor that contributed to the continued decline of the AUD / USD pair. Investors now appear to be convinced that the Fed is comfortable rolling back the crisis-era stimulus. The fundamental context favors the USD bulls, suggesting that the path of least resistance for the AUD / USD pair remains to the downside.
That said, the oversold RSI on the hourly charts could prevent bearish traders from placing new bets. Market participants are now looking forward to the US economic agenda, which features the Philadelphia Fed manufacturing index releases and initial weekly jobless claims. This, coupled with broader market risk sentiment, could influence USD price dynamics and produce some short-term trading opportunities around the AUD / USD pair.
Technical levels
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