- AUD/USD gains some ground on Thursday in reaction to a stellar jobs report in Austalia.
- Expectations of an aggressive Fed rate hike push the USD to a 20-year high and cap the pair’s gains.
- Recession fears continue to weigh on investor sentiment and the risk-sensitive Aussie.
The pair AUD/USD it struggled to capitalize on its modest rebound on Wednesday and fluctuated between tepid gains and small losses during the early part of the European session. The pair remained in neutral territory, around the 0.6765-0.6770 zone, and remains at the mercy of the US dollar’s price dynamics.
the australian dollar rebounded after the release of the national jobs report, which showed the unemployment rate fell to the lowest level in nearly 50 years. The data reinforced the case for an interest rate hike by the Reserve Bank of Australia (RBA) at its upcoming monetary policy meeting in August. However, the intraday rally lacked bullish conviction amid fresh buying around the US dollar.
In fact, the dollar index rose to a new 20-year high and continued to receive support from the prospects for more aggressive Fed policy tightening. US consumer inflation figures released on Wednesday reinforced bets for another big interest rate hike by the Federal Reserve. In addition, the president of the Atlanta Fed, Raphael Bostic, stated that everything is at stake to combat persistent inflationary pressures.
The markets were quick to react began to assess the possibility of a historic 100 basis point Fed rate hike this month. This, in turn, kept US Treasury yields high and continued to support the dollar. This, coupled with growing fears over a potential global recession and the risk-off environment, benefited the safe-haven dollar, and acted as a headwind for the risk-sensitive Aussie.
Even from a technical point of view, the AUD/USD pair has, thus far, struggled to capitalize on its bounce from the vicinity of the 0.6700 mark, or the lowest level since June 2020. Furthermore, the recent stretch to the The low has occurred along a descending channel, which points to a well-established short-term downtrend. This makes it prudent to wait for strong continuation buying before positioning for any significant recovery moves.
AUD/USD technical levels to watch
Source: Fx Street
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