AUD/USD hangs near daily low, 0.7000 holds the key for bulls amid resurgent USD demand – by hareshmenghani AUDUSD Recession Fed Bonds Currencies
d during the Asian session. Spot prices retreat to the lower end of the daily range, around the 0.6980-0.6975 region, and remain at the mercy of the US Dollar price dynamics.
Following a brief consolidation, the USD catches aggressive bids in reaction to the Bank of Japan-led sell-off in the Japanese Yen. Apart from this, the cautious market mood - amid growing worries about a deeper global economic downturn - further benefits the greenback's relative safe-haven status and acts as a headwind for the risk-sensitive Aussie. That said, a combination of factors should help limit any meaningful corrective decline for the AUD/USD pair, at least for the time being.
Investors seem convinced that the Fed will soften its hawkish stance in the wake of easing inflationary pressures. In fact, the markets are currently pricing in a greater chance of a smaller 25 bps Fed rate hike move in February. This leads to a fresh leg down in the US Treasury bond yields, which might hold back the USD bulls from placing aggressive bets and lend some support to the AUD/USD pair. Furthermore, optimism over a Chinese economic recovery could underpin the China-proxy Aussie.
Apart from this, rising odds for an additional interest rate hike by the Reserve Bank of Australia in February support prospects for the emergence of some dip-buying around the AUD/USD pair. This makes it prudent to wait for strong follow-through selling before confirming that spot prices have topped out and positioning for any meaningful corrective pullback. Traders now look forward to important US macro releases for a fresh impetus later during the early North American session.
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