- AUD/USD extended the previous day’s post-FOMC pullback from YTD lows.
- The risk-off mood benefitted the safe-haven USD and exerted some pressure.
- A sustained break below the 0.6900 mark needed to confirm any further slide.
The AUD/USD pair edged lower through the Asian session on Thursday and extended the previous session’s late pullback from YTD tops.
The pair on Wednesday spiked to the highest level July 2019 after the Fed pledged to maintain the federal fund target rate unchanged at near-zero levels through 2022. The US central bank also committed to increase its holdings of treasury/MBS at least at the current pace. The policy stance turned out to be even more accommodative than expected, which aggravated the US dollar bearish pressure and remained supportive of the AUD/USD pair’s positive move.
However, the Fed’s gloomy economic projections took its toll on the global risk sentiment. now expects GDP to contract -6.5% in 2020 and the unemployment rate to be at 9.3% by year-end. This, in turn, provided a goodish lift to the USD’s safe-haven status and exerted some heavy downward pressure on the perceived riskier Australian dollar. The pair has now reiterated to the lower end of its weekly trading range, albeit has still managed to hold comfortably above the 0.6900 mark.
The aussie was further weighed down by the fact that domestic Consumer Inflation Expectations for June unexpectedly edged lower to 3.3% as compared to 4.2% estimated and 3.4% previous. Later during the early North American session, the release of the US Producer Price Index (PPI), along with the Initial Weekly Jobless Claims data might produce some short-term trading opportunities. In the meantime, the pair remains at the mercy of the broader market risk sentiment and the USD price dynamics.
From a technical perspective, a sustained break below the 0.6900 mark (weekly lows) will be seen as a fresh trigger for bearish traders and prompt some technical selling. The pair might then accelerate the slide further towards testing the next major support near the 0.6845 horizontal zone.
Technical levels to watch
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