In the first half of the European session on Friday, March 25, the AUD/USD fell below 0.7500 or a fresh daily low below its yearly high.
- AUD/US experienced a modest pullback intraday from a new year high earlier this week.
- Moreover, the Fed’s dovish outlook and higher US bond yields were headwinds for the US dollar.
- The Australian dollar continued to be supported by rising commodity prices, limiting further losses.
AUD/USD fundamental analysis: Fed hawks and soaring yields to weigh
After posting modest intraday gains on Friday, the pair posted a modest pullback from its high reached in early November 2021 near 0.7535. Some of the drops may be attributed to buying around the US dollar, which continued to be bolstered by the Fed’s dovish outlook.
FOMC’s next rate hikes
As a result, Fed Chair Jerome Powell and other influential members of the FOMC have left the door open for higher borrowing costs to bring inflation down. At the May meeting, investing markets cheered a 50 basis point rate hike, pushing yields on benchmark 10-year US Treasurys closer to a 22-month high.
Rising WTI prices
Additionally, fears that rising crude oil prices will continue to push consumer prices higher continue to support high US Treasury yields. Consequently, the dollar strengthened against the AUD/USD, and the AUD/USD experienced some profit-taking, especially after a rally of more than 350 points from the monthly low.
Despite rising commodity prices that continue to support the resource-pegged Australian dollar, there is limited downside. Therefore, we recommend waiting for any significant follow-up selling before confirming. The AUD/USD has topped in the near term and preparing for a significant correction.
What’s next to watch?
However, the AUD/USD pair has seen gains for the second consecutive week. Next week, a revised Michigan Consumer Sentiment Index and upcoming data on home sales will be released in the US economic report. Combined with US bond yields, this will impact dollar momentum and provide some lift.
AUD/USD price technical analysis: иears start emerging
The AUD/USD price hit the top just below the 0.7550 area and started declining. On the 4-hour chart, we can see a bearish engulfing candle. This is a sign of bearish trend reversal that may trigger later on Friday or next week. We may find stiff support around the 0.7500 handles in a bearish reversal. If the level breaks, the price may further losses towards 0.7450 and 0.7400. On the flip side, if the new high of 0.7540 is broken, the pair may head towards the 0.7600 area.
The moving averages on the 4-hour chart are still far below the prices. It shows that the pair is still holding a bullish bias. As long as the price is above the 20-period SMA, we will keep our bias towards the upside, and the pullback will only be a minor correction. The MACD indicator has shown a weak sign of bearish reversal.
