- AUD/USD dives to its lowest level since April 2020 amid another blowout USD rally.
- Aggressive Fed rate hike bets, elevated US bond yields continue to boost the buck.
- The risk-off mood also contributes to driving flows away from the risk-sensitive aussie.
The AUD/USD pair comes under renewed selling pressure on Wednesday and slides below the 0.6400 mark for the first time since April 2020. The pair maintains its offered tone through the early European session and is currently placed around the 0.6370-0.6365 region, down over 1.0% for the day.
A combination of supporting factors lifts the US dollar to a fresh two-decade high, which, in turn, is seen exerting downward pressure on the AUD/USD pair. The overnight hawkish remarks by Fed officials reaffirm the prospects for a more aggressive policy tightening by the Fed and remain supportive of a further rise in the US Treasury bond yields. This, along with the risk-off mood, continues to underpin the safe-haven buck.
In fact, Minneapolis Fed President Neel Kashkari said on Tuesday that policymakers are determined to do what is needed to bring inflation down. Adding to this, Chicago Fed President Charles Evans noted that the US central bank will need to raise interest rates to a range between 4.50% and 4.75%. The yield on the benchmark 10-year US government bond shot to 4% for the first time since April 2010 following the comments.
Investors, meanwhile, remain worried that Fed policy will push the economy into recession. Apart from this, the risk of a further escalation in the Russia-Ukraine conflict continues to take its toll on the global risk sentiment. This is evident from a generally weaker tone around the equity markets, which is driving flows towards the greenback and contributing to the selling bias surrounding the risk-sensitive aussie.
With the latest leg down, the AUD/USD pair confirms this week's bearish breakdown through the lower end of a multi-month-old descending channel. A subsequent fall and acceptance below the 0.6400 mark might have already set the stage for an extension of the downward trajectory. Hence, some follow-through weakness towards testing the next relevant support, around the 0.6300 mark, remains a distinct possibility.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD holds gains near 0.6600 as RBA Governor Bullock speaks
AUD/USD clings to gains near 0.6600 early Tuesday. The Aussie fails to find any inspiration, as the RBA holds the key interest rate at 4.35%. Strong China's Caixin Services PMI data supports the Aussie amid a steady US Dollar and a tepid risk tone. RBA Governor Bullock's presser gets underway.
USD/JPY: Rebound remains capped below 152.50 amid cautious mood
USD/JPY consolidates the bounce below 152.50 in Asian trading on Tuesday, tracking the US Dollar price action. The pair's upside remains capped by strong Japanese PMI data and a cautious market mood. Traders remain wary as Americans head to polls this Tuesday.
Gold traders appear non-committal on the US election day
Gold price is miring in five-day lows near $2,730 in Asian trading on Tuesday, lacking a clear direction. Traders remain wary and refrain from placing fresh bets on Gold price on the US presidential election day.
Trump-inspired memecoin MAGA shows bullish on-chain metrics ahead of US elections
MAGA trades slightly down to around $3.4 on Tuesday after rallying more than 20% since Sunday. The former President Donald Trump-based memecoin is poised for further gains as daily active addresses and network growth metrics rise, signaling increased network usage and adoption.
US presidential election outcome: What could it mean for the US Dollar? Premium
The US Dollar has regained lost momentum against its six major rivals at the beginning of the final quarter of 2024, as tensions mount ahead of the highly anticipated United States Presidential election due on November 5.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.