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AUD / USD with modest losses below 0.7100 level

The pair AUD/USD has recovered most of the initial drop and remains with modest losses near the 0.7090 level during the European session on Friday, after recovering from the daily lows of 0.7070.

The pair has seen some new selling on the last trading day of the week and has approached the nearly three-week lows reached the previous day, amidst the expectations of further easing of monetary policy by the RBA. It’s worth remembering that RBA Governor Philip Lowe gave a strong indication Thursday that the central bank could cut interest rates or announce new stimulus measures at its next meeting in early November.

This is due to growing market concerns about sharp increase in new coronavirus cases, which could lead to further blockages and hamper the global economic recovery. This, in turn, has benefited the safe haven US dollar and it has worked even more to divert monetary flows away from the Australian dollar, the currency of higher perceived risk.

Meanwhile, the signs of stability in equity markets, along with a softer tone around US Treasury yields., have limited strong gains for the USD and could help limit deeper losses for the AUD / USD pair. This makes it prudent to wait for some subsequent selling below the previous day’s lows, around the 0.7055 region, before positioning for any further downside moves in the short term.

Market participants are now awaiting the release of the US monthly retail sales figures for further momentum. Friday’s US economic calendar also features industrial production data and the University of Michigan’s preliminary estimate of the consumer sentiment index for October. The data, along with broader market risk sentiment, will influence USD price dynamics and could lead to some short-term trading opportunities.

Credits: Forex Street

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