• AUD/USD came under renewed selling pressure on Monday amid a pickup in the USD demand.
  • The prevalent risk-on mood also did little to lend any support to the perceived riskier aussie.
  • The downside is likely to remain cushioned as the focus remains on the FOMC policy decision.

The AUD/USD pair extended its steady intraday descent through the early part of the European session and dropped to a fresh daily low, around the 0.7140-35 region in the last hour.

The pair struggled to capitalize on last week’s strong recovery move from sub-0.7000 levels or the lowest level since November 2020 and met with a fresh supply on Monday. The US dollar was back in demand amid hawkish Fed expectations and was seen as a key factor that exerted some downward pressure on the AUD/USD pair.

Investors seem convinced that the Fed would tighten its monetary policy sooner rather than later to contain stubbornly high inflation. The market expectations were reaffirmed by Friday’s data, which showed that the headline CPI accelerated to the highest level since 1982 and the core CPI recorded the sharpest rise since mid-1991.

In the meantime, the USD bulls seemed rather unaffected by a softer tone surrounding the US Treasury bond yields. Even the prevalent risk-on environment also did little to lend any support to the perceived riskier aussie. This, in turn, favours bearish traders and support prospects a further intraday downside for the AUD/USD pair.

That said, investors might prefer to wait on the sidelines ahead of the highly-anticipated FOMC monetary policy decision, scheduled to be announced on Wednesday. Given that the money markets have been pricing in the possibility for an eventual liftoff in May 2022, the outcome should provide a fresh directional impetus to the AUD/USD pair.

Even from a technical perspective, the two-way price move witnessed over the past four trading sessions points to indecision over the AUD/USD pair’s near-term trajectory. This makes it prudent to wait for a strong follow-through selling before placing aggressive bearish bets amid absent relevant market moving economic releases from the US.

Technical levels to watch

This article was originally published by Fxstreet.com.Read the original article here.

LEAVE A REPLY

Please enter your comment!
Please enter your name here