- The Reserve Bank of Australia recently surprised markets by announcing details of its bond purchase tapering.
- The 61.8% Fibonacci retracement level is likely to support the AUD/USD pair at 0.7358.
- Forex trading market participants may sell below the $0.7358 level to target $0.7320 and 0.7287.
During Wednesday’s Asian trading hours, the AUD/USD currency pair extended its previous session’s bearish bias. It dropped to three-day lows, further below the 0.7400 level. However, the downside rally was mainly sponsored by the RBA’s surprise move. On Wednesday, the AUD/USD price prediction remains bearish. However, the 61.8% Fibonacci Retracement level is likely to support the pair at 0.7358.
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The Reserve Bank of Australia recently surprised markets by announcing details of its bond purchase tapering. It kept the benchmark interest rate unchanged at 0.10%. Furthermore, it maintained the 0.10% target for the April 2024 Australian Government bond.
The Rate Statement fueled economic fears due to the virus-led local lockdowns and the AUD/USD. Meanwhile, the strong follow-through of sharp increases in US Treasury bond yields aided the US dollar’s recovery from one-month lows. This was seen as one of the key factors that kept the AUD/USD pair down.
Risk-off sentiment undermines the AUD/USD pair.
In addition to this, the market’s prevalent risk-off sentiment, backed by multiple factors, also played a significant role in undermining the AUD/USD pair.
At this particular time, the AUD/USD pair is trading at 0.7370 and consolidating in the range between 0.7365 and 0.7405. The AUD/USD currency pair initially edged higher after the Reserve Bank of Australia moved ahead with the plan to taper its bond-buying to A$4 billion a week.
However, the gains were short-lived as the extension of the purchase period from November 2021 to February 2022 disappointed market participants. This, in turn, weighed on the Australian dollar and fueled some fresh selling around the AUD/USD currency pair.
Fears of Covid-19 Continue to Play
On the other hand, the doubling of virus-related hospitalizations in the United States in a year and a 67% increase in covid-related deaths in the last two weeks has heightened COVID-19 fears in the United States. Thus, it exerted additional pressure on the weaker market sentiment and provided a goodish lift to the safe-haven US dollar.
The US 10-year Treasury yields got a lift from the risk aversion wave and crossed last month’s high. It’s underpinning the US Dollar Index (DXY) to mark the biggest daily jump since August 19.
In that way, the downfall in the currency pair has been exclusively sponsored by broad-based USD strength. The broad-based US dollar hit near a one-week high on Wednesday against major peers, buoyed by higher…
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