- AUD/USD licks its wounds near one-week low after four-day downtrend, retreats from daily high.
- Aussie PM tries to defend record virus-led deaths, surge in hospitalizations in NSW.
- Australia Westpac Consumer Sentiment eased in January, US NY Empire State Manufacturing Index drops to two-year low.
- Second-tier US housing data will decorate calendar but higher attention will be given to yields and Fed rate-hike expectations.
AUD/USD consolidates recent losses around the weekly bottom, recently grinding at the intraday top near 0.7190 during Wednesday’s Asian session.
The pair’s recent corrective pullback, which snapped a four-day downtrend, could be linked to cautious optimism by Australia PM Scott Morrison and a pause in the US Treasury yields after refreshing multi-day high. Even so, softer Aussie data and concerns over the Fed’s next moves, as well as relating to South African covid variant, namely Omicron, keep the AUD/USD prices capped.
The risk barometer pair dropped for the fourth consecutive day by the end of Tuesday’s North American session, also poked the lowest levels since December 11, as market sentiment turned sour amid increasing hopes of faster Fed rate hikes. Adding to the bearish bias was escalating Omicron's fears.
That said, Aussie PM Morrison recently said that Australia is still "doing better than almost every other country in the world when it comes to even the large number of more than 350 deaths in the course of the past week," per ABC News. The national leader appeared for a press conference after the virus-led deaths rose past 50 for the last two days. It’s worth noting that the nation’s most populous state New South Wales (NSW) recently reduced booster wait time to three months.
Read: Australian PM Morrison: Have not received advice to shorten the isolation rules
Talking about the data, Australia Westpac Consumer Confidence eased to 102.2 versus 104.30 for January. It’s worth noting that, NY Empire State Manufacturing Index slumped to negative for the first time in two years in December, -0.7 versus 25.7 expected and 31.9 prior, whereas US NAHB Housing Market Index eased to 83 versus 84 market forecasts and previous readouts.
Amid these plays, US 10-year Treasury yields refresh two-year high near 1.88%, up 1.8 basis points (bps) whereas S&P 500 Futures remain directionless after a negative performance of the Wall Street benchmarks.
Moving on, increasing confidence over the Fed’s faster monetary policy normalization can keep fueling the yields and weigh on AUD/USD prices. Also challenging the quote are the virus woes and geopolitical tensions between Russia and Ukraine.
Technical analysis
Having reversed from the 100-DMA, AUD/USD stays directed towards an ascending support line from December 03, around 0.7165 at the latest. The bearish bias takes clues from the downbeat MACD and RSI conditions.
However, a monthly ascending trend line near 0.7150 adds to the downside filters before giving controls to the sellers targeting the 2021 bottom surrounding 0.6990. During the fall, August month’s low near 0.7105 will act as a buffer.
Meanwhile, the 100-DMA and the monthly top, respectively around 0.7285 and 0.7315, restrict the short-term AUD/USD upside.