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  • A combination of factors assisted AUD/USD to attract some dip-buying near the 0.7700 mark.
  • The ongoing pullback in the US bond yields weighed on the USD and extended some support.
  • A slight recovery in the global risk sentiment further benefitted the perceived riskier aussie.

The AUD/USD pair climbed to fresh daily tops, around the 0.7740 region in the last hour and has now filled a modest weekly bearish gap.

The pair once again managed to find decent support near the 0.7700 mark and for now, seems to have stalled its pullback from monthly tops touched in reaction to the dovish FOMC statement last week. The intraday uptick of around 35-40 pips was supported by a combination of factors, though lacked any bullish conviction and runs the risk of fizzling out rather quickly.

The yield on the benchmark 10-year US government bond extended its recent retracement slide from over one-year tops and failed to assist the US dollar to capitalize on its intraday gains. Turkish President Tayyip Erdogan’s decision to replace a hawkish central bank governor sparked fears about disruption in other asset classes and drove some haven flows towards the USD.

The early market reaction, however, turned out to be short-lived. This was evident from a goodish rebound in the US equity futures, which provided an additional boost to the perceived riskier aussie. That said, the prospects for a relatively faster US economic recovery might continue to underpin the greenback and keep a lid on any meaningful upside for the AUD/USD pair.

This makes it prudent to wait for some strong follow-through buying before confirming that the recent slide has run its course and positioning for any further appreciating move. Market participants now look forward to the US economic docket, featuring the only release of the US Existing Home Sales data for some impetus during the early North American session.

The key focus, however, will be on Fed Chair Jerome Powell’s comments during an online event and scheduled speeches by influential FOMC members. This, along with the US bond yields and the broader market risk sentiment, will play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities around the AUD/USD pair.

Technical levels to watch