- AUD/USD edges lower after a three-day downtrend that teased yearly low.
- US dollar extends post-Fed gains as markets prepare for rate hike, Aussie data/RBA’s Lowe forgotten after initial reaction.
- US inflation expectations drop to three month low, Treasury yields, gold follow the tune.
- Lack of major data/events highlights key risk catalysts, market dynamics over Fed’s signals as crucial directives.
AUD/USD holds lower ground near 0.7550-55 amid a sluggish start to Friday’s Asian session. In doing so, the Aussie bears take a breather around the yearly low, attacked the previous day, following a three-day south-run. Although the market’s adjustments to the Fed’s rate-hike signals become the major catalysts backing the US dollar, also weighing on the quote, a lack of fresh clues probes further downside around multi-day low.
King Dollar keeps the reins…
The US Federal Reserve’s (Fed) gig on Wednesday roiled the US inflation expectations, fueling the rush to risk-safety, as traders brace for two rate hikes in 2023. The same put a safe-haven bid under the US dollar and propelled the US dollar index (DXY) to a two-month top, around 91.88 by the end of Thursday’s North American session.
The risk-off mood gained extra support from the downbeat prints of the US data, namely the Weekly Jobless Claims and Philadelphia Fed Manufacturing Survey.
On the other hand, Australia’s strong jobs report for May failed to keep AUD/USD buyers happy, after the initial stint. That said, RBA Governor Philip Lowe also sounds a bit nervous and exerts downside pressure on the quote.
Amid these plays, Wall Street closed mixed and the US 10-year Treasury yield drops 5.8 basis points (bps) to 1.51% at Thursday’s closing.
It’s worth noting that the escalating tension between the West and China adds to the AUD/USD weakness and so do worries concerning the Delta variants of the covid, not to forget the grim outlook over RBA’s next moves.
Looking forward, a lack of major catalysts may keep directing AUD/USD traders to follow the same route but nearness to the yearly bottom tests the bears and requires a strong blow to break the 0.7531 level. Hence, risk-related headlines will be in focus for fresh impetus.
Technical analysis
AUD/USD sellers battle 200-day SMA level of 0.7553 amid oversold RSI conditions, suggesting a pullback towards immediate hurdle surrounding the 0.7600 threshold, quickly followed by March’s low near 0.7620. However, any further weakness past 200-day SMA needs a decisive break below the year’s bottom of 0.7531 to aim for August 2020 levels near 0.7415.