AUD/USD bears take a breather at two-year low near 0.6450, risk-aversion, US data eyed
- AUD/USD pauses two-day downtrend at 28-month low, paring losses of late.
- Risk-off mood joined firmer yields to weigh on the pair.
- Panic selling of the GBPUSD, calls for central bank intervention contributed to the sour sentiment.
- Bears are likely to keep reins amid light calendar, corrective bounce can’t be ruled out.
AUD/USD justified its risk-barometer status as markets panicked on Monday, before traders lick their wounds near 0.6460 during Tuesday’s early Asian session. The quote’s latest weakness could be linked to the broad pessimism amid the GBP/USD pair’s plunge that raised concerns over multiple central bank interventions.
GBP/USD slumped to the all-time low on Monday amid market’s scathing rejection to the new tax-cut measures, fearing more burden on the monetary policymakers and fiscal budget. The same triggered speculations that the Bank of England (BOE) needs to intervene to defend the domestic currency, allowing the cable to pare some losses. However, the British central bank refrained from any immediate moves and renewed selling of the Cable.
At home, the People’s Bank of China’s (PBOC) updates surrounding the increase in the Forex reserves tried to defend the AUD/USD buyers recently but failed amid the risk-off mood.
The sour sentiment pushed market players to demand premium and pushed the Treasury yields towards the north, which in turn joined the hawkish Fedspeak to propel the US dollar and weigh on the AUD/USD prices.
On Monday, Chicago Fed National Activity Index weakened to 0.0 in August versus 0.09 market expectations and an upwardly revised prior reading of 0.29. Even so, Boston Fed President Susan Collins said, per Reuters, “Getting inflation down will require slower employment growth, somewhat higher unemployment rate”. Following that, Cleveland Fed President Loretta Mester said on Monday that if there is an error to be made, better that the Fed do too much than to do too little.
Technical analysis
Despite the latest pause in the downside, a clear break of the four-month-old bearish channel’s support line, now resistance around 0.6500, keeps AUD/USD bears hopeful of visiting the 78.6% Fibonacci Expansion (FE) of April-August moves, near 0.6360.