AUD/USD drops to fresh session lows, back closer to mid-0.7300s
- A combination of factors prompted some fresh selling around the AUD/USD pair on Tuesday.
- COVID-19 jitters, the risk-off impulse in the markets undermined the perceived riskier aussie.
- Some follow-through uptick in the US bond yields benefitted the USD and added to the selling.
The AUD/USD pair extended its steady intraday descent and dropped to fresh daily lows, around the 0.7365-60 region heading into the European session.
The pair struggled to capitalize on the previous day's goodish intraday bounce of around 60 pips from multi-day lows and once again met with some fresh supply in the vicinity of the 0.7400 mark. Worries about a rise in new COVID-19 cases in Australia's most populous state continued acting as a headwind for the Australian dollar and exerted some pressure on the AUD/USD pair.
In fact, New South Wales reported 145 new cases on Monday, up from 141 a day earlier, as it struggles to contain an outbreak of the highly contagious Delta variant of the coronavirus. The authorities have said they want that number near zero before lifting restrictions on July 30 target date. This largely offset the optimism about the possible easing of lockdown in Victoria.
Apart from this, a generally softer tone around the equity markets exerted some additional pressure on the perceived riskier aussie. This, along with a modest US dollar strength, contributed to the offered tone surrounding the AUD/USD pair. The greenback found support from some follow-through uptick in the benchmark 10-year US government bond yield, back closer to the 1.30% threshold.
Moving ahead, market participants now look forward to the US economic docket, highlighting the releases of Durable Goods Orders and the Conference Board's Consumer Confidence Index. The key focus, however, will be on the outcome of a two-day FOMC monetary policy meeting, starting this Tuesday, which will help determine the next leg of a directional move for the AUD/USD pair.
Heading into the key event risk, the latest Australian consumer inflation figures, due out during the early part of the trading action on Wednesday, would provide some meaningful impetus. Meanwhile, the AUD/USD pair's inability to capitalize on its bounce from YTD lows suggests that the recent bearish trend might still be far from being over.
Technical levels to watch