Retreating US bond yields force the USD to consolidate its recent gains to a two-decade high.The AUD/USD pair recovers its intraday losses to sub-0.6700 levels and climbs to the top end of its daily range during the first half of the European session. The pair is currently trading around the 0.6730-0.6735 region, though any meaningful recovery still seems elusive.
The US dollar now seems to have entered a bullish consolidation phase amid a modest pullback in the US Treasury bond yields. This, along with a positive risk tone undermines the safe-haven greenback and offers some support to the risk-sensitive aussie. That said, growing worries about a deeper economic downturn should keep a lid on any optimistic move in the markets.
Technically, the pair has been in a medium-term downtrend which began at the start of August and so the bias remains to the downside, despite looking a little over extended. Bullish day traders may have capitalized on the bounce off of the major trend line connecting the April and June 2022 highs touched earlier today, but whether and for how long this key support level will hold remains in doubt, especially given the bearish backdrop. The YTD lows at 0.
There isn't any major market-moving economic data due for release from the US on Wednesday. Hence, the focus will be on speeches byofficials later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. Apart from this, traders might take cues from the broader risk sentiment to grab short-term opportunities around the major.
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