China Might Cut Steel Output

The losing streak of the AUD/USD currency pair continued on Friday as it lost more ground in the earlier part of the European session, and it eventually fell to a new low point not seen in many weeks. This is close to the 0.7300 benchmarks, as seen about an hour before this report.

AUD/USD price chart. Source TradingView

Concerns over the possibility of China’s rumored plan to cut down on its steel production for the rest of this year might have a significant impact on the demand for iron ore in Australia. This might turn out to be the major factor that exerted much pressure on the Australian dollar as it is benchmarked by natural resource exports. This, as well as a number of follow-up purchases of the US dollar, added much heavy pressure on the decline of the AUD/USD currency pair for the second day in a row.

There was a strong comeback for the US dollar from its weekly low point, which it reached on Thursday on the announcement from the Chairman of the Federal Reserve, Jerome Powell, when he confirmed the market’s anticipation of a more rapid monetary policy fastening by the Reserve. Powell stated that increasing the interest rate by up to 50 basis points will definitely be on the table during the Federal Open Market Committee meeting scheduled for the 3rd to 4th of May, while he equally gave hints that there might be other series of increments again in the course of the year.

Pricing-In Multiple 50 Basis Points Increase

There was a rapid reaction in the market, and it has begun to price in up to three consecutive 50 basis points interest rate increases, and this consequently pushed the interest rate-reactive five-year US government bond over 3% for the first time since 2018. There was a continued sell-off in the United States fixed income on Friday, which combined with the risk sentiment, came to underpin the buck in its safe-haven status.

The decline in the pair took with it some major stops in near-term trading that were close to the 50-period simple moving average in the vicinity of the 0.7355 zones. It does coincide with the ascending pattern that was prolonged from the year-to-date low point. This might then be considered a new impetus for bears, and it supports the possibility of prolonging a downtrend that is almost three weeks old.