On Monday, the AUD/USD pair defended the 100-day SMA and added some ground. However, the pair retreats to 0.6700 in the early North American session.
On Monday, supporting factors help the US Dollar attract dip-buying, which hurts the AUD/USD pair. Despite China loosening COVID-19 restrictions, a large surge in new infections could delay the economy’s full reopening. This and the ongoing Russia-Ukraine war cap market optimism and boost the safe-haven buck. Last week’s Fed hawkishness limits intraday USD declines.
The US central bank said it would keep raising rates to fight inflation. Policymakers also forecast at least 75 bps of borrowing cost increases by 2023, quashing rate decrease hopes. This raises US Treasury bond yields, supporting the dollar. The underlying backdrop favours USD bulls and warns against positioning for a further AUD/USD appreciation in the absence of significant macroeconomic data.
The focus now switches to this week’s final US Q3 GDP print and the Fed’s favoured inflation gauge, the core PCE Price Index. US bond yields will influence USD prices and boost the AUD/USD pair.
Conclusion
China’s risk sentiment and COVID-19 scenario will also influence short-term Aussie trades.