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  • AUD/USD witnessed a modest intraday pullback from the vicinity of YTD tops.
  • A modest USD bounce from two-year lows exerted some downward pressure.
  • The risk-on mood extended some support to the pair and helped limit the slide.

The AUD/USD pair retreated around 50 pips from daily tops and was last seen hovering near the lower end of its daily trading range, around the 0.7135-30 region.

The pair failed to capitalize on its early uptick to the 0.7175 region, instead started retreating from the vicinity of YTD tops set last Wednesday amid a modest US dollar rebound from near two-year lows. The greenback found some support on the back of expectations that policymakers have moved closer to a conclusion on the next US fiscal stimulus package.

This comes ahead of the two-day FOMC meeting that gets underway this Tuesday and forced investors to lighten their bearish USD bets. However, worries that the economic recovery in the US could be grinding to a halt in the wake of the resurgence in coronavirus cases might keep a lid on any strong recovery for the greenback.

Meanwhile, the optimism over a potential vaccine for the highly contagious COVID-19 remained supportive of the upbeat market mood. This, in turn, extended some support to the perceived riskier Australian dollar and helped limit any meaningful slide for the AUD/USD pair, at least for the time being.

Market participants now look forward to the US economic docket – highlighting the release of the Conference Board’s Consumer Confidence Index and Richmond Manufacturing Index. The data might influence the USD price dynamics and produce some meaningful trading opportunities later during the early North American session.

Technical levels to watch