On Thursday, the AUD/USD currency pair remained under selling pressure for the third day in a row.
The COVID-19 worries, as well as the general risk-averse environment, took their toll on the perceived riskier Aussies.
Sliding US bond rates kept USD bulls on the defensive, but provided little assistance.
During the early European session, the AUD/USD pair extended its intraday losses and hit new seven-month lows around 0.7425.
On Thursday, the pair continued this week’s rejection drop from the 0.7600 area, with some follow-through selling for the third straight session. Fresh COVID-19 worries wreaked havoc on global risk sentiment, and it turned out to be a major driver in the perceived riskier Aussie.
Investors are now concerned about the economic consequences of new restrictions imposed to combat the spread of the extremely dangerous Delta version of the coronavirus. The lockdown of Australia’s largest city, Sydney, has been extended for another week, and stay-at-home orders will now be in effect until July 16.
The US dollar, on the other hand, saw a minor dip from three-month highs on a further drop in US Treasury bond yields, although this did nothing to help the AUD/USD pair. On Thursday, the yield on the benchmark 10-year US government bond fell below 1.30 percent, reaching multi-month lows.
This shows uncertainty about the economy, which has prevented USD bulls from making aggressive wagers. However, signs that the Fed is getting closer to tightening its monetary policy this year may continue to act as a tailwind for the greenback, supporting the AUD/USD pair’s prospects for more losses.
Policymakers expect conditions to slow the pace of asset purchases to be met sooner than previously expected, according to the minutes of the June FOMC meeting released on Wednesday. Fed policymakers also agreed that if inflation or other threats develop, they must be prepared to act, implying that QE tapering conversations could begin in the coming months.
Even from a technical standpoint, a sustained breach below the prior YTD lows, at 0.7445, may have already laid the stage for the current decline to continue. As a result, a drop to the next key support, around the 0.7400 round-figure mark, appears to be a strong possibility.
Market players are now anticipating the publication of US Initial Weekly Jobless Claims data later in the early North American session. This, in combination with US bond rates and overall market risk sentiment, may affect USD price dynamics and create some short-term trading opportunities in the AUD/USD pair./n
