- AUD / USD has been under pressure in recent trading as risk-sensitive currencies are sold and safe havens (USD included) bought.
- Volumes were subdued with the Australian and UK markets closed, but are picking up now that the US session has started.
The AUD/USD has seen a sharp pullback in recent trading, falling from 0.7250 in the Asian session to current levels below 0.7220 following the arrival of US market participants ahead of the US opening. Volumes during the Asia Pacific and Europe sessions were much lower than normal and roughly in line with those seen during last week’s trade slowdown due to the Australian and UK financial markets closing on Monday.
This has weighed on the Aussie, which looks set to test the key 0.7200 level shortly. At current levels, the AUD / USD is trading roughly 0.7% lower on the session and is the worst performer among its G10 peers, with the prices of major Australian metals exports falling (copper -1.5% , gold -1.0%) not helping. Since the pair has fallen below the support of the short-term trend line, more selling is possible to come.
The Australian dollar’s performance largely dovetails with the G10 currency markets that took a more defensive / risk-averse bias on Monday, with the dollar and yen being safe havens despite stocks in Europe and the US. (in premarkets, at least) they are trading higher. There is no new topic or development that can point to why currency markets are in a risk-averse mood, but traders may be making some gains from risk-sensitive currencies after their recent strength.
Some are concerned about record rates of Omicron infection in the UK, the US and elsewhere and a potential increase in hospitalizations. Elsewhere, some have suggested that the dollar’s rise against some of its G10 peers could be due to a big rise on the day in U.S. bond yields (10-year yields up 9bp to about 1.60% and 2-year-olds up to approximately 6bp to just under 0.80%). If this were the case, one would expect that the USD / JPY (the G10 pair most sensitive to movements in the rate markets) would rise, which at the moment it is not.
Technical levels
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