AUD/USD is still on the cautious in the center of the 0.6900 zone, and further declines are unlikely.

Market Analytics and Considerations

Key Notes

• The AUD/USD pair declines from a cross top reached on Thursday despite a little USD increase.
• The appetite for the safe-haven greenback is reviving as a result of rising US bond yields and a milder risk tenor.
• The USD should be capped and the downside for the major limited by rising expectations for fewer Fed raising rates.

Friday sees considerable price pressure on the AUD/USD cross, which eliminates a portion of the preceding day’s significant advances to the top level until August 26. The pairing is trading near to the day bottom, inside the mid-0.6900s, as the European session gets underway.

The US Dollar is being helped by a number of reasons to launch a moderate recovery from a 7-month trough, which hurts the AUD/USD pairing. The US greenback is given modest assistance by a little increase in US Treasury bond yields and a muted vibe on the equities sectors. The euphoria sparked by China’s decision to turn away from its zero-COVID policy is overshadowed by the country’s deadliest COVID-19 epidemic. In addition, the extended Russia-Ukraine confrontation has depressed business confidence & stoked worries of a deeper worldwide recession. In turn, this encourages some refuge flows to the dollar and undermines the risk-averse Australian Dollar.

Nevertheless, any significant USD rebound continues to appear elusive despite growing expectations for future lower Fed rate hikes. The recent release of US consumer inflation figures on Thursday served to confirm markets’ expectation that the US central bank would moderate its hawkish outlook. Additionally, a number of FOMC members backed the argument for a 25 bps lift-off in Feb, that should maintain US bond yields under control while also putting the Greenback bulls on the defensive. In addition, the likelihood that the Reserve Bank of Australia  will increase interest rates again in February supports expectations that certain lows-buying will develop inside the AUD/USD cross.

Therefore, it would be prudent to hold off on verifying that now the fundamental has established a relatively close peak and setting for a further correction downturn until there is amount of potential selling. The Preliminary Michigan Consumer Sentiment Index survey from the US is presently anticipated by market participants. It is scheduled to be released later during in the initial North American period. This will fuel USD desire and give the AUD/USD pairing some impetus, coupled with US bond yields and the general attitude. Spot prices are still expected to close in the green for the fourth consecutive week.

Key Technical levels to monitor