- AUD/USD continues to push lower during American trading hours.
- Surging US T-bond yields provide a boost to the USD.
- Focus shifts to FOMC’s policy announcements and dot plot.
The AUD/USD pair remains under modest pressure in the second half of the day amid broad-based USD strength ahead of the FOMC event. As of writing, the pair was down 0.55% on a daily basis at 0.7701.
US T-bond yields extend rally
In the absence of significant fundamental drivers, the US Treasury bond yields continue to impact the greenback’s market valuation. Currently, the 10-year benchmark T-bond yield, which touched its highest level in nearly 13 months at 1.687%, is up 3.05% at 1.669% and the US Dollar Index is rising 0.13% at 91.99.
Meanwhile, the risk-averse market environment, as reflected by a 0.5% decline in the S&P 500 Index, is making it difficult for the AUD to stage a recovery.
Later in the session, the FOMC will release its Monetary Policy Statement alongside the updated Economic Projections. Market participants will look for clues regarding the possible timing of tapering and a hawkish signal is likely to cause AUD/USD to push lower ahead of the weekend.
On the other hand, if the median forecast of Fed policymakers shows that rates are expected to stay near zero through 2023, as per December’s projections, the greenback could lose its strength and pave the way for an AUD/USD rebound.
In the early trading hours of the Asian session on Thursday, the Australian jobs report will be watched closely by market participants as well. The market consensus point to a 30K increase in Employment Change in February and a stronger-than-expected print could help AUD find demand.
Technical levels to watch for
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