- AUD/USD remains on the back foot for third consecutive day as sellers approach 2022 bottom.
- DXY rises to the fresh high since 2002 as market’s rush to risk-safety escalates ahead of the European open.
- China, Russia and inflation are the key challenges for global markets.
- Mixed data from Beijing, downbeat iron ore prices also strengthen the bearish bias.
AUD/USD bears are in full steam as the risk-aversion wave directs the quote towards the yearly low of 0.6966, down 1.10% around 0.6995 by the press time of early Monday morning in Europe.
The risk barometer pair’s latest fall could be linked to the US dollar’s run-up, mainly due to the safe-haven appeal and increasing chatters that the Fed won’t be able to defend “only 50 bps” rate hikes for long. That said, the US Dollar Index (DXY) refreshes the highest level since November 2002, up 0.38% to 104.10 at the latest.
Also weighing the AUD/USD prices towards the south are the mixed trade numbers from China, as well as a slump in the prices of Australia’s key export item namely iron ore.
Although China’s Trade Balance improved in the USD terms, to +51.12B versus +50.65B expected and +47.38B previous, the figures in CNY terms aren’t impressive as the trade surplus eased to CNY325.08 billion versus CNY441.88 expected and CNY300.58 billion last.
It’s worth noting that iron ore prices slump 6.0% as activity restrictions in the world’s largest metal consumer, namely China, weigh on the AUD/USD prices.
Elsewhere, fears that Russia won’t bend the knee and can keep marching its approach to invade Ukraine also exert downside pressure on the pair. Recently, the Group of Seven (G7) nations levied various sanctions on Russia but Moscow stays ready to celebrate World Wall II victory with an extravagant military parade, as well as to formally announce a declaration of war against Ukraine.
More importantly, rising fears of global stagflation, due to the surge in inflation and tighter monetary policy, act as an extra catalyst to drown the AUD/USD pair.
Amid these plays, the US 10-year Treasury yields remain firmer around the highest levels since late 2018 while stock futures drop over 1.0% by the press time.
Moving on, risk catalysts can keep the AUD/USD prices pressured towards the yearly low ahead of Tuesday’s National Australia Bank’s (NAB) sentiment data. More important will be Wednesday’s inflation numbers for China and the US, as well as Australia’s Westpac Consumer Confidence.
Technical analysis
A clear downside break of the 0.7000 threshold, comprising the support line of a two-month-old falling wedge chart pattern, directs AUD/USD prices towards the yearly low surrounding 0.6965.