- AUD/USD catches fresh bids on Monday and snaps a five-day losing streak to a multi-week low.
- The PBoC's move to lower benchmark rates offers support to the China-proxy Australian dollar.
- Recession fears, sustained USD buying interest should cap gains for the perceived riskier aussie.
The AUD/USD pair kicks off the new week on a positive note and snaps a five-day losing streak to a nearly one-month low touched on Friday. The pair maintains its bid tone through the early European session, albeit struggles to find acceptance or build on the momentum beyond the 0.6900 round-figure mark.
The People’s Bank of China (PBoC) lowered its benchmark rates for a second consecutive week in a bid to support a slowing economy. This, in turn, offers some support to the China-proxy Australian dollar and prompts some short-covering around the AUD/USD pair. That said, sustained US dollar buying might hold back traders from placing aggressive bullish bets around the major and keep a lid on any meaningful upside, at least for the time being.
The greenback prolongs its one-and-half-week strong upward trajectory and climbs to the highest level since mid-July amid hawkish Fed expectations. The recent comments by several Fed officials suggested that the US central bank will stick to its policy tightening path. This, along with a generally weaker tone around the equity markets, continues to underpin the safe-haven buck and should act as a headwind for the risk-sensitive aussie.
Hence, it would be prudent to wait for strong follow-through buying before confirming that the recent sharp pullback from a two-month high has run its course and positioning for any further gains. In the absence of any major market-moving US economic releases on Monday, the AUD/USD pair remains at the mercy of the USD price dynamics. Traders would further take cues from the broader risk sentiment to grab short-term opportunities.
