Going into the European session, the AUD/USD pair managed to hold onto its intraday gains and was last seen lingering near the day’s high, around the 0.7200 level.
In addition to building on Friday’s rebound from the 0.7130 region, which represented a more than two-week low, the pair received some follow-through momentum on the opening trading day of the current trading week.
As a result of a generally upbeat tone in the financial markets, the Australian Dollar gained ground for the second day in a row. This is beneficial to the considered riskier Aussie.
That so, rising US Dollar demand restrained bulls from initiating aggressive wagers and kept the AUD/USD pair’s upside potential limited, at least for the time being.
Review Of The Technical Aspects
AUD/USD CHART Source: Tradingview.com
The Australian Dollar’s recovery has been halted below 0.7200 due to COVID and China’s real estate industry concerns.
The spot was last seen moving at 0.7190, up 0.20% on the day, after hitting a daily top of 0.7198 and a bottom of 0.717. It had previously traded at 0.7198 and 0.717.
The Dollar made a strong return on Monday, despite rising rates on US Treasury bonds, which were boosted by anticipation of a stronger tightening of monetary policy by the Fed.
The dismal headline figure for nonfarm payrolls was somewhat offset by a larger-than-expected decline in the jobless rate in the United States, as well as significant wage growth.
The data supported market expectations for a Fed lift-off in March 2022, which was subsequently viewed as a crucial factor in driving up US bond rates and reviving demand for the US currency.
Review Of The Fundamentals
The fundamental background favors the USD bulls, but care should be taken before preparing for any additional appreciation in the AUD/USD pair in the near term.
Investors may also be hesitant to make bold wagers, preferring instead to wait for a new catalyst to emerge from the recent consumer inflation numbers in the United States, which are scheduled to be released on Wednesday.
In addition to these events, the testimony of Fed Chair Jerome Powell on Tuesday and the US monthly retail sales data due out on Friday will be watched closely by traders.
In the meantime, the yields on US Treasury bonds will continue to play a significant role in determining the market dynamics of the US Dollar and providing some support to the AUD/USD pair.
This, combined with the general risk mentality in the market, could provide traders with some short-term trading opportunities around the main indices.
According to Australia’s Prime Minister, Scott Morrison, the highly infectious Omicron coronavirus strain affects the country’s labor and consumer expenditure.