- AUD/USD struggled to capitalize on modest intraday gains amid an extension of the USD rally.
- Aggressive rate hike bets from the Fed, mostly upbeat US macro data, lifted the USD to a more than two-year high.
- Risk-off mood, weaker iron ore prices further helped to cap the resource-linked Aussie.
The pair AUD/USD trimmed a significant part of its intraday gains and pulled back below 0.7200, closer to the daily low during the early American session.
The pair attracted some buying on Tuesday, although the positive intraday move lost steam near the 0.7230 region amid the US dollar’s uninterrupted rally to the highest level since March 2020. Expectations that the Fed will raise interest rates in 50 bps in each of its next four meetings in May, June, July and September continued to support the dollar.
Adding to this, the risk-off mood further benefited the dollar’s relative safe-haven status and acted as a headwind for the perceived riskier Australian dollar. Prospects for more aggressive policy tightening by the Fed, coupled with prolonged COVID-19 lockdowns in China, fueled concerns about slowing global economic growth and weighed on investor sentiment.
On the economic data front, US Durable Goods Orders disappointed market expectations and rose 0.8% MoM in March. This, however, marked a solid rebound from the previous month’s upwardly revised reading of -1.7%. Adding to this, orders excluding transportation items rose 1.1% vs. 0.6% expected and continued to support the USD.
Aside from this, a prolonged slide in iron ore prices is further helping to limit any significant upside for the resource-linked Australian dollar. The fundamental backdrop seems heavily tilted in favor of bearish traders and supports prospects for an extension of the AUD/USD pair’s recent sharp pullback from the 0.7660 region, or the yearly high hit earlier this month.
Technical levels
Source: Fx Street
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