- AUD/USD oscillates in a narrow trading band just above a nearly one-month low.
- RBA’s inaction and China’s economic woes continue to cap the Australian Dollar.
- Bets for one more Fed rate hike offset Fitch downgrade and lend support to the USD.
- The fundamental backdrop supports prospects for additional losses for the the major.
The AUD/USD pair consolidates its recent downfall to a nearly one-month low and seesaws between tepid gains/minor losses through the Asian session on Wednesday. Spot prices currently trade just above the 0.6600 round-figure mark, nearly unchanged for the day, and the lack of any meaningful buying supports propsects for an extendion of the recent descending trend witnessed over the past three weeks or so.
The AUD/USD pair did get a minor lift in the wake of some intraday US Dollar (USD) selling that followed the Fitch downgrade of the US Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'AA+' from 'AAA'. The intial market reaction, however, remains limited on the back of a generally softer risk tone, which tends to undermine the risk-sensitive Aussie. Apart from this, rising bets for one more 25 bps rate hike by the Federal Reserve (Fed) in September or November act as a tailwind for the USD and contribute to caping the upside for the major.
It is worth recalling that Fed Chair Jerome Powell said last week that the economy still needs to slow and the labour market to weaken for inflation to credibly return to the 2% target. Furthermore, the incoming US macro data points to an extremely resilient economy and further supports prospects for further tightening by the Fed. This remains supportive of elevated US Treasury bond yields and lends support to the USD. Apart from this, the Reserve Bank of Australia's (RBA) decision to leave rates unchanged on Tuesday favours the AUD/USD bears.
The aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the downside, though hopes for more stimulus from China could help limit losses for the China-proxy Australian Dollar (AUD). Hence, it will be prudent to wait for a sustained break below the 0.6600 mark before positioning for further losses. Traders now look to the US ADP report on privaet-sector employment, due later during the early North American session, which, along with the broader risk sentiment, should provide some impetus to the AUD/USD pair.
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
EUR/USD drops to two-year lows below 1.0400 after weak PMI data
EUR/USD stays under bearish pressure and trades at its weakest level in nearly two years below 1.0400. The data from Germany and the Eurozone showed that the business activity in the private sector contracted in early November, weighing on the Euro.
GBP/USD falls to six-month lows below 1.2550, eyes on US PMI
GBP/USD extends its losses for the third successive session and trades at a fresh fix-month low below 1.2550 on Friday. Disappointing PMI data from the UK weigh on Pound Sterling as market focus shift to US PMI data releases.
Gold price refreshes two-week high, looks to build on momentum beyond $2,700 mark
Gold price hits a fresh two-week top during the first half of the European session on Friday, with bulls now looking to build on the momentum further beyond the $2,700 mark. This marks the fifth successive day of a positive move and is fueled by the global flight to safety amid persistent geopolitical tensions stemming from the intensifying Russia-Ukraine war.
S&P Global PMIs set to signal US economy continued to expand in November
The S&P Global preliminary PMIs for November are likely to show little variation from the October final readings. Markets are undecided on whether the Federal Reserve will lower the policy rate again in December.
A new horizon: The economic outlook in a new leadership and policy era
The economic aftershocks of the COVID pandemic, which have dominated the economic landscape over the past few years, are steadily dissipating. These pandemic-induced economic effects are set to be largely supplanted by economic policy changes that are on the horizon in the United States.
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.