The AUDUSD fails to hold its slight intraday gains.

The AUDUSD (Aussie) pair struggles to consolidate on its small intraday gains and falls a few pips short of the daily high, which was reached in the mid-0.7000s during the early European session. Spot prices, on the other hand, manage to stay above the psychological level of 0.7000 and appear prepared to extend the recent upward trend seen over the last three months or so.

Furthermore, increased likelihood of another rate hike by the Reserve Bank of Australia (RBA) in February may continue to offer support to the Aussie and restrict the pair’s downside. The Australian consumer inflation numbers released earlier this month boosted the bets, showing that the headline CPI re-accelerated to 7.3% YoY in November, a 32-year high. As a result, the market will stay focused on the fourth-quarter Australian CPI data, which is due on Wednesday.

Fears of a recession weigh on investors’ morale and limit the risk-sensitive Australian dollar (AUDUSD).

A lower risk tone, in the face of rising global recession fears, helps the safe-haven US Dollar recoup some of its intraday losses while acting as a negative for the Aussie pair. Nonetheless, a major USD rebound remains difficult, despite rising expectations that the Fed may ease its aggressive stance. In reality, markets have been pricing in a higher probability of a 25 basis point Fed rate cut.

In the meanwhile, traders will take cues from the US economic calendar, which includes the publication of flash PMI prints and the Richmond Manufacturing Index. This, together with the US bond, the USD price dynamics will be influenced by yields and wider risk sentiment, providing some momentum to the AUDUSD pair. Nonetheless, the fundamental background continues to favor optimistic traders, implying that any retreat might be viewed as a buying opportunity and stay confined.

AUDUSD Technical Analysis Summary