The AUD/USD currency pair pulled back from a nearly two-week high on Monday as investors awaited fresh catalysts. While an intraday recovery in global risk sentiment helped limit the downside, the pair faced headwinds from bets for a less hawkish Federal Reserve. Traders now turn their attention to the upcoming RBA minutes for short-term direction.
What Caused the Pullback in AUD/USD?
The pullback in AUD/USD was primarily due to a combination of factors. Firstly, the pair had reached a two-week high earlier in the day, which prompted some profit-taking. Additionally, investors remained cautious ahead of the upcoming RBA minutes, which could provide clues on the central bank’s monetary policy stance.
On the positive side, an intraday recovery in global risk sentiment lent some support to AUD/USD. This was driven by a rebound in Asian stocks and a decline in US Treasury yields. However, this was not enough to offset the negative impact of fresh USD selling, prompted by bets for a less hawkish Federal Reserve.
What to Expect for AUD/USD in the Future?
The future outlook for AUD/USD remains uncertain, given the prevailing market conditions. The pair is likely to face headwinds from the ongoing uncertainty over the Federal Reserve’s monetary policy stance. While some analysts expect a hawkish tilt, others predict a more cautious approach, which could limit any potential upside for the US dollar.
On the other hand, the Australian dollar is likely to remain supported by improving economic data and rising commodity prices. The country’s GDP grew by 3.4% in Q4 2021, beating expectations, while iron ore prices continue to surge. However, any downside risks to the global economic recovery could weigh on the currency.
Traders will be closely watching the upcoming RBA minutes for short-term direction. The central bank is expected to maintain its current monetary policy stance, with interest rates likely to remain unchanged. However, any hints of a hawkish tilt could provide a boost to AUD/USD, while a more cautious tone could lead to further downside.
In conclusion, the AUD/USD currency pair retreated from a two-week high on Monday, with an intraday recovery in global risk sentiment providing some support. However, fresh USD selling prompted by bets for a less hawkish Federal Reserve limited the downside. Traders now turn their attention to the upcoming RBA minutes for short-term impetus, with the future outlook for AUD/USD remaining uncertain.