- AUD / USD remains under some selling pressure for the fourth day in a row on Tuesday.
- Nervousness over Covid-19 and a modest USD strength continues to put downward pressure on the pair.
- A strong rally in equity markets helps limit the decline in the perceived riskiest AUD.
The pair AUD/USD remains under pressure during the first half of the European session on Tuesday, moving around the 0.7325-30 region, just above the eight-month lows touched earlier in the day.
The pair has seen some continuation selling for the fourth day in a row and has come under pressure from a combination of factors. Investors follow concerned that the fast-spreading delta variant of the coronavirus will hurt the global economic recovery. Aside from this, prolonged lockdowns in Australia’s two most populous states, Sydney and Victoria, have continued to act as a headwind for the Australian dollar.
The bulls haven’t gotten any respite after the RBA’s July 5 meeting minutes reiterated that the central bank’s baseline scenario for the economy is that the conditions for rate hikes will not be met before 2024. In other events, the People’s Bank of China (PBOC) kept the one-year and five-year prime loan rates (LPR) intact at around 3.85% and 4.65%, although it had little influence on the Australian dollar.
On the other hand, the US dollar has held firm near three-and-a-half-month highs amid a nice rally in US Treasury yields. That said, the diminishing odds of impending Fed action in the near future has prevented USD bulls from opening aggressive positions. This, along with a strong rally in equity markets, has offered some support to the Aussie perceived riskier and has helped the AUD / USD pair to stay above the 0.7300 level.
However, the inability of the AUD / USD pair to register any significant recovery suggests that the recent downward pressure may still be far from over. This, in turn, favors the bears and supports the prospects for an extension of the move to the downside. In the absence of major US economic releases, the pair remains at the mercy of broader market risk sentiment and price dynamics around the US dollar.