AUDUSD fails to hold its modest intraday gains despite the advent of some USD buying.
The AUDUSD pair continues to struggle to find acceptance or build on its momentum. Above the 100-day Simple Moving Average (SMA). Attracting some intraday selling near 0.6580 on Friday. The decline accelerates during the first half of the European session. Dragging spot prices to a new daily low in the mid 0.6500s despite a minor US Dollar (USD) gain.
The Fed’s hawkish view is expected to promote higher US bond yields and underpin the dollar.
Against the backdrop of Persistent geopolitical tensions in the Middle East. As well as diminishing hopes for early rate cuts by global central banks, have dampened recent optimism. This is visible in a small pullback in the equities markets. Which helps the safe-haven USD gain traction while undermining the risk-sensitive Australian dollar. The Greenback is further bolstered by the Federal Reserve’s (Fed) hawkish outlook. Which puts downward pressure on the AUDUSD pair.
The minutes of the late January FOMC meeting, released on Wednesday, revealed widespread confusion about how long borrowing costs should continue at their current level to bring inflation back to the central bank’s 2% target. Additionally, comments by a number of key Fed policymakers implied that the US central bank is not in a hurry to lower interest rates. This supports rising US Treasury bond yields and permits the USD to recover further from its roughly three-week low reached on Thursday.
A small dip in the equity markets pushes flows away from the risk-sensitive Australian dollar.
Moving forward, there is no meaningful market-moving economic data scheduled for publication from the United States on Friday, putting the USD at the mercy of US bond yields. Aside from that, broader risk sentiment may fuel demand for the safe-haven dollar, providing some support to the AUDUSD pair. Nonetheless, spot prices remain on course to achieve small gains for the third consecutive week, albeit the lack of follow-through purchasing suggests some caution for optimistic traders before positioning for any further gains.
