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  • Reviving safe-haven demand for the USD exerted some pressure around AUD/USD.
  • A goodish bounce in the equity markets helped the pair to stall its intraday decline.
  • The upside seems limited as the focus remains on the FOMC decision on Wednesday.

The AUD/USD pair quickly recovered around 30 pips from the early European session dip to over one-week lows and was last seen trading with modest losses, around the 0.7700 mark.

A combination of factors took its toll on the global risk sentiment and forced investors to take refuge in the safe-haven US dollar. This, in turn, was seen as a key factor that drove flows away from the perceived riskier aussie through the first half of the trading action on Tuesday.

Against the backdrop of growing market worries about the economic fallout from the coronavirus pandemic, doubts over the size and timing of the US stimulus dampened the market mood. Adding to this, escalating US-China tensions in the South China Sea further weighed on investors’ sentiment.

It is worth reporting that Republicans have raised objections on the expensive price tag of a $1.9 trillion proposed stimulus package. Moreover, Democratic Majority Leader Chuck Schumer fueled uncertainty over the timing and said that a comprehensive deal could be four to six weeks away.

Despite the negative forces, the AUD/USD pair stalled its intraday decline near the 0.7670-65 region and has now moved back closer to the top end of its daily trading range. A goodish rebound in the European equity markets capped the USD and assisted the pair to attract some dip-buying.

It, however, remains to be seen if bulls are able to capitalize on the move or opt to remain on the sidelines ahead of this week’s key event/data risk from the US. The FOMC will announce its policy decision on Wednesday and the Advance US Q4 GDP report is scheduled for release on Thursday.

In the meantime, Tuesday’s release of the Conference Board’s Consumer Confidence Index will be looked upon for some impetus. Traders will further take cues from the broader market risk sentiment and developments surrounding the coronavirus saga, which might influence the USD price dynamics.

Technical levels to watch