- AUD/USD consolidates the heaviest daily gains in a week, fades bounce off six-week-old support.
- Pullback in US Treasury yields initially favored buyers but US President Biden’s comments renewed risk-off mood.
- Biden signaled various concerns ranging from Fed to Russia to China suggesting challenges for risk appetite.
- Australia Inflation Expectations, jobs reports and PBOC interest rate will be the key to watch.
AUD/USD takes a U-turn from the weekly top towards 0.7200 during the initial Asian session on Thursday, having cheered softer US Treasury yields the previous day.
The Aussie pair’s latest pullback could be linked to US President Joe Biden’s press conference as the US Leader signals Fed rate hike, Sino-American tussles and geopolitical hardships. Also exerting downside pressure on the AUD/USD prices is the cautious sentiment ahead of the key Australia employment data for December, as well as Inflation Expectations for January, not to forget the interest rate announcement by the People’s Bank of China (PBOC).
Although US President Biden highlights Chief Trade negotiator Katherine Tai’s efforts to placate Sino-American trade tussles, he also mentioned that the US is “'not there yet' on possible easing of tariffs on Chinese goods”. Biden also said, “China is not meeting its purchase commitments.”
Further, comments favoring Federal Reserve (Fed) Chairman Jerome Powell’s push to recalibrate the support also raised concerns over faster rate hikes and balance sheet normalization, which in turn exerted additional downside pressure on the AUD/USD prices.
Additionally, US President Biden directly warned Russia not to invade Ukraine and if they do they’ll lose access to the US dollar.
Read: US President Biden: Inflation has everything to do with supply chain
With the aforementioned headlines suggesting challenges to the market sentiment, the risk barometer AUD/USD couldn’t be saved and pared the previous day’s gains, the first in the week.
Before that, the easing in the US Treasury yields and Australia PM Scott Morrison’s hope of overcoming the grave virus conditions, with the record death toll, seemed to have favored the AUD/USD prices. Also favoring the quote were the strong gold prices that rallied the most since early November to post a three-month high.
It should be noted that firmer US housing numbers helped equities to consolidate earlier losses but couldn’t save the US bond yields that initially refreshed the two-year top.
That said, AUD/USD pair’s further weakness hinges upon the monthly inflation expectations and jobs report, not to forget the PBOC rate actions.
Forecasts suggest, Australia's Employment Change may ease to 30K versus 366.1K prior while the Unemployment Rate is likely to ease to 4.5% versus 4.6%. The same suggests that the labor market is strong enough to help RBA keep the hawkish bias. However, the Consumer Inflation Expectations should overcome the 4.8% prior to favor the bulls. Also, the PBOC is widely expected to act in regards to the 3.8% benchmark rate, which if happens may help the AUD/USD to recover some of the latest losses.
Read: Australian Employment Preview: Aussie unlikely to benefit from a strong jobs report
Technical analysis
Despite bouncing off a seven-week-old support line, AUD/USD fails to cross the 100-SMA on the four-hour chart.
The pullback move gains support from RSI retreat and sluggish MACD, which in turn hints at further drop towards the 200-SMA and the stated support line, respectively near 0.7190 and 0.7180. It’s worth noting, however, that a clear downside break of the 0.7180 will drag AUD/USD towards the monthly low of 0.7129 and August 2021 trough surrounding 0.7105.
Meanwhile, the monthly horizontal resistance near 0.7180 acts as an extra hurdle to the north even if the AUD/USD prices manage to cross the immediate SMA resistance surrounding 0.7225.
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: The hunt for the 0.7000 hurdle
AUD/USD quickly left behind Wednesday’s strong pullback and rose markedly past the 0.6900 barrier on Thursday, boosted by news of fresh stimulus in China as well as renewed weakness in the US Dollar.
EUR/USD refocuses its attention to 1.1200 and above
Rising appetite for the risk-associated assets, the offered stance in the Greenback and Chinese stimulus all contributed to the resurgence of the upside momentum in EUR/USD, which managed to retest the 1.1190 zone on Thursday.
Gold holding at higher ground at around $2,670
Gold breaks to new high of $2,673 on Thursday. Falling interest rates globally, intensifying geopolitical conflicts and heightened Fed easing bets are the main factors.
Bitcoin displays bullish signals amid supportive macroeconomic developments and growing institutional demand
Bitcoin (BTC) trades slightly up, around $64,000 on Thursday, following a rejection from the upper consolidation level of $64,700 the previous day. BTC’s price has been consolidating between $62,000 and $64,700 for the past week.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.