- AUD/USD builds on last weeks late bounce and gains traction for the next straight day.
- Retreating US bond yields, a confident risk tone undermines the USD and extends support.
- Recession fears might cap the risk-sensitive aussie prior to the US CPI report on Tuesday.
The AUD/USD pair catches some bids for the successive straight day on Monday and builds on last week’s bounce from sub-0.6700 levels or the cheapest since July 14. This marks the 3rd day of a confident move in the prior four and lifts spot prices to a far more than one-week high, nearer to the 0.6900 mark through the mid-European session.
A variety of factors force the united states dollar to prolong its recent sharp pullback from the two-decade high, which, subsequently, sometimes appears lending support to the AUD/USD pair. The markets already appear to have priced in a supersized 75 bps rate hike by the Federal Reserve at another policy meeting on September 20-21. Furthermore, a modest downtick in america Treasury bond yields appears to weigh on the greenback.
Aside from this, a generally positive tone round the equity markets further undermines the safe-haven buck and benefits the risk-sensitive aussie. Having said that, growing recession fears, amid the prospects for a faster policy tightening by major central banks and economic headwinds stemming from fresh COVID-19 curbs in China could cap optimism. This, subsequently, warrants some caution for bullish traders.
Investors may also avoid placing aggressive bets and would rather proceed to the sidelines prior to the latest US consumer inflation figures, due for release on Tuesday. The key US CPI report for August will play an integral role in influencing the Fed’s policy outlook. This can drive the USD demand in the near term and help determine another leg of a directional move for the AUD/USD pair.
For the time being, spot prices will consolidate in a variety amid absent relevant market-moving economic releases from the united states on Monday. Having said that, the united states bond yields, together with the broader risk sentiment, may provide some impetus to the greenback and invite traders to seize short-term opportunities round the AUD/USD pair.
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