AUD/USD retreats after rising to the highest level since December 2018
- AUD/USD caught some fresh bids in reaction to Powell’s dovish sounding comments.
- A sharp fall in the US bond yields further undermined the USD and remained supportive.
- The positive momentum falters ahead of the 0.7300 mark, warranting caution for bulls.
The AUD/USD pair rallied to the 0.7300 neighbourhood, or the highest level since December 2018 in reaction to the Fed Chair Jerome Powell's dovish comments, albeit quickly retreated around 50 pips thereafter.
The US dollar weakened across the board after Powell – during the highly anticipated speech at the Jackson Hole Symposium – signalled that the Fed will seek to ensure that employment does not fall short of its maximum level. Powell said that the committee now seeks to achieve inflation that averages 2% over time.
The fact that the Fed placed employment before inflation lays the groundwork for a looser monetary policy for the foreseeable future. This, in turn, triggered a steep decline in the US Treasury bond yields, which aggravated the intraday bearish pressure around the greenback and pushed the AUD/USD pair to the 0.7290 region.
However, the strong intraday positive momentum quickly ran out of the steam amid a turnaround in the US bond yields, which prompted some short-covering move around the USD. The AUD/USD pair witnessed some aggressive long-unwinding trade and retreated around 50 pips in the last hour, warranting some caution for bullish traders. This makes it prudent to wait for a sustained move beyond the mentioned level before positioning for any further appreciating move.
Technical levels to watch