Negative Territory Hovering Persists

There was a new set of purchases attracted to the US dollar in the earlier part of the European session, and it pulled the Aussie pair down to a low point of two weeks in the vicinity of 0.7460 within an hour of writing this.

After the AUD/USD pair had a short period of consolidation in the course of the first part of the trading session on Friday, the currency pair was unfortunate to have seen a new stream of supply, and it moved into negative territory for a third straight day. The hawkish position of the Federal Reserve ushered the US dollar into its highest point for the first time since May, and it was taken as a major consideration that exerted some pressure on the price of the spot.

AUD/USD price chart. Source TradingView

It should be recalled that the minute from the Federal Open Market Committee meeting was published on Wednesday. The minutes showed that policymakers at the United States Federal Reserve are prepared to implement an increase of 50 basis points in interest rates at the next monetary policy meeting of the reserve coming up in May. 

Much more, the meeting revealed that there is a general consensus about the need for the central bank to reduce its over-bloated balance sheet, possibly in the coming month. The consensus has it that the balance sheet of the Federal Reserve should not exceed $95 billion in any month, so inflation can be checked properly. As well as the increased US Treasury bond yield, this keeps its effort to underpin the pair.

The Federal Reserve

The market’s anticipation of a more aggressive monetary policy implementation from the Federal Reserve is coming in the midst of concerns that the latest increase in the global price of commodities is likely to increase consumer inflation rates to unprecedented heights. The coming together of these various factors aided the US bond yield in staying strong, close to the many years’ highest point, which also serves in favor of the US dollar and its bullish traders. But it appears to have now got the stage ready for more losses where the AUD/USD currency pair is concerned.

From a technical point of view, an acceptance under the 0.7500 psychological benchmarks and a follow-up breakthrough to mid-0.7400 levels would indicate that the currency pair is topping out in the short term.