The AUD/USD pair has struggled to hold onto its gains as the US dollar strengthened against its Australian counterpart. The greenback rose in value due to expectations that the Federal Reserve will adopt a hawkish outlook, which will cause US bond yields to rise.
Higher bond yields increase the attractiveness of US assets to foreign investors, leading to a surge in demand for the dollar. This, in turn, strengthens the dollar against other currencies, including the Australian dollar.
RBA’s Dovish Shift Weighs on AUD/USD Pair
In addition to the hawkish outlook of the Fed, the Reserve Bank of Australia’s (RBA) dovish shift has also contributed to the weakening of the AUD/USD pair. The RBA announced that it would extend its bond-buying program until November, indicating that it is not yet ready to begin tightening monetary policy.
The RBA’s decision to continue with its bond-buying program reflects its concerns about the economic impact of the COVID-19 pandemic. The bank believes that the economic recovery is fragile and that there is still a risk of a setback.
Traders Eye US Macro Releases for Short-term Opportunities
Looking ahead, traders will be closely monitoring important US macro releases for short-term opportunities in the AUD/USD pair. These releases include the US retail sales data, which will be released on Wednesday, and the US consumer sentiment index, which is due on Friday.
The US retail sales data is expected to show a decline in consumer spending, which could weaken the dollar. However, if the data comes in better than expected, it could support the dollar and push the AUD/USD pair lower.
In conclusion, the AUD/USD pair has struggled to maintain its gains due to a combination of factors, including the hawkish outlook of the Federal Reserve, the dovish shift of the Reserve Bank of Australia, and the upcoming US macro releases. Traders will be closely monitoring these factors for short-term opportunities in the pair.