- A combination of factors prompted some fresh selling around AUD/USD on Thursday.
- Weaker risk tone benefitted the safe-haven USD and drove flows away from aussie.
- Dovish Fed expectations capped the USD upside and might help limit further losses.
The AUD/USD pair maintained its offered tone through the early North American session, albeit has managed to rebound few pips from the vicinity of mid-0.7200s or weekly lows.
Following the previous day’s attempted recovery move and a subsequent pullback from the 0.7330 region, the pair met with some fresh supply on Thursday despite upbeat Australian employment details. A softer risk tone benefitted the US dollar’s relative safe-haven status and was seen as a key factor driving flows away from the perceived riskier Australian dollar.
The optimism about a potential vaccine for the highly contagious coronavirus diseases was overshadowed by worries about the continuous surge in new infections and its impact on the fragile global economic recovery. This, in turn, dented investors’ appetite for riskier assets, which was evident from a weaker trading sentiment around the equity markets.
The USD stood tall following the release of disappointing US macro data. In fact, the US Initial Weekly Jobless Claims rose to 742K during the week ended November 14. The reading was well above consensus estimates, pointing to a modest fall to 707K from the previous week’s upwardly revised 711K. Separately, the Philly Fed Manufacturing Index fell to 26.3 in November from 32.3
That said, concerns about the economic fallout from the imposition of new COVID-19 restrictions in several US states fueled speculations about additional monetary easing by the Fed. This, along with the ongoing slide in the US Treasury bond yields, held the USD bulls from placing aggressive bets and limited deeper losses for the AUD/USD pair.
Hence, it will be prudent to wait for some strong follow-through selling before confirming that the recent strong rally from sub-0.7000 levels has run out of the steam and positioning for any further depreciating move.
Technical levels to watch
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