AUDUSD will meet with new supply as new USD purchasing emerges.
AUDUSD pair faces further selling pressure on Thursday and remains offered throughout the first part of the European session. The pair is now trading in the 0.6725-0.6720 range, well within striking distance of its lowest level since early January, which was reached the previous day.
Hawkish Fed predictions continue to drive up US bond rates and support the dollar.
US Dollar remains bullish momentum and reverses some of the previous day’s strong retracement decline from a multi-week high, which is viewed as a significant factor impacting on the AUDUSD pair. Rising expectations that the Fed would maintain its hawkish posture for an extended period of time is pushing up US Treasury bond rates. Apart from that, the current cautious market atmosphere – amidst imminent recession threats – advantages the safe-haven asset even more. Greenback that leads to the migration of funds away from the risk-averse Australian.
Markets are persuaded that the US Federal Reserve will continue to tighten monetary policy in the face of persistently rising inflation. Furthermore, the incoming US macro data indicated a strong economy despite rising borrowing costs, which should allow the Fed to maintain interest rates higher. Moreover, Minneapolis Fed President Neel Kashkari hinted at a 50-basis point raise at the next meeting in May, pushing the yield on the benchmark 10-year US government bond to its highest level since November.
Nevertheless, overnight excitement fueled by strong Chinese PMI prints for February dissipates swiftly in the face of imminent recession danger. This is visible from a broad perspective. The lower tone in the stock markets offers more support to the USD and implies that the AUDUSD pair’s path of least resistance is to the negative.
Therefore, it will be smart to wait for extended weakening below 0.6700 before making further negative bets and preparing for more near-term depreciation.
Market players are now anticipating the publication of the Weekly Initial Jobless Claims data from the United States, which is scheduled for later in the early North American session. Together with US bond rates and overall risk sentiment, this should affect USD price dynamics and offer some momentum to the AUDUSD pair.
