AUDUSD falls to a new weekly low, below 06650

• AUDUSD attracts new sellers on Thursday amid a strong rebound in demand for US dollars.
• Rebound in US Treasury yields, momentum from risk aversion propels dollar as a safe haven.
• The fundamental background supports the prospects for a further depreciation move for the AUDUSD.

AUDUSD comes under strong selling pressure on Thursday and extends the overnight pullback from 0.6800, ie two-month highs. The intraday fall remains uninterrupted during the beginning of the North American session and drags to a new weekly minimum, around the area of ​​0.6635 in the last hour.

Resurgent Demand for US Dollars Causes AUDUSD to Be Aggressively Selling

The US dollar makes a strong comeback on Thursday and pulls away from its lowest level since August 12, hit earlier this week, which, in turn, is seen putting downward pressure on AUDUSD. The release of the US Retail Sales figures on Wednesday cast doubt on the inflation-peak narrative. Positive consumer data forces market participants to reduce their bets for a less aggressive policy from the Federal Reserve (Fed). This is evident from the nice rally in US Treasury yields and helps revive demand for dollars.

Dollar bulls took note of remarks by St. Louis Fed President James Bullard that monetary policy is not yet in a tight enough range to reduce inflation. The dollar maintains its offered tone after the release of modestly better-than-expected housing market data and initial jobless claims, which offset the Philadelphia Fed’s manufacturing index. Traders are now awaiting speeches from other regional Fed chairs – Raphael Bostic, Loretta Mester and Neel Kashkari – for fresh momentum.

Momentum from risk aversion contributes to sharp intraday drop

A new wave of risk aversion globally – as evidenced by the sharp intraday decline in equity markets – provides an additional boost to the safe-haven dollar. Market sentiment remains fragile amid concerns about economic headwinds stemming from a new outbreak of COVID-19 in China, the world’s second largest economy. In addition, the risk of a further escalation of geopolitical tensions – amid the protracted war between Russia and Ukraine – dampened investor appetite for riskier assets and helped steer flows away from the price-sensitive Australian dollar. risk.

AUDUSD looks vulnerable to extension of corrective decline

The resource-linked Australian dollar is coming under further pressure from the ongoing decline in copper prices, weighed down by growing concerns about a deeper global economic recession. The combination of the aforementioned factors dwarfs the mostly upbeat Australian jobs data released on Thursday. Market players seem convinced that the data was not strong enough for the Reserve Bank of Australia to abandon its dovish course. This, in turn, suggests that the path of least resistance for the AUDUSD is to the downside and any attempt to recover could still be seen as an opportunity for bearish traders.

AUDUSD Technical Outlook

From a technical point of view, repeated failures near 0.6800 in the last two sessions seem to have led traders to unwind their bullish positions around the AUDUSD pair. The inability to hold above the 100-day SMA now paints a more bearish picture, and the subsequent drop below the previous weekly low, around the 0.6665-0.6660 zone, could already have set the prices. foundations for deeper losses. Therefore, weakness towards 0.6600 is possible, en route to the 0.6500 area, where previous key resistance turned support is likely to provide a hard bottom for any sell-offs.

On the other hand, any meaningful recovery attempt looks to be met with stiff resistance and risks moderating near the 0.6700 round figure, in the 100 SMA region. That said, sustained strength beyond could trigger a rally of short positions and lift spot prices towards the 0.6735-0.6740 zone. Bulls could then aim to conquer 0.6800, which should act as a benchmark and help determine the next leg of a directional move for the AUDUSD pair.

AUDUSD Key Levels to Watch