- AUD / USD remained under some selling pressure for the fourth straight session on Tuesday.
- Nervousness from COVID-19, a modest strength in the US dollar continued to put downward pressure on the major.
- A solid rebound in the equity markets helped limit the decline in the Aussie, which was seen as riskier.
AUD / USD remained depressed during the first half of the European session and was last seen around the 0.7325-30 region, just above the eight-month lows hit earlier on Tuesday.
The pair had sales in a row for the fourth day in a row and came under pressure by a combination of factors. Investors remain concerned that the rapidly spreading Delta variant of the coronavirus could harm the global economic recovery. Apart from that, prolonged lockdowns in Australia’s two most populous states, Sydney and Victoria, continued to act as headwinds for the Aussie dollar.
The bulls got no respite after the July 5 RBA meeting minutes reiterated that the central bank’s baseline scenario for the economy is that the conditions for rate hikes will not be fulfilled before 2024. In other central bank events, the People’s Bank of China (PBOC) kept the prime lending rates (LPRs) for one year and five years intact around 3.85% and 4.65% , although it had little influence on the Chinese proxy Australian dollar.
On the flip side, the US dollar has held close to three-and-a-half-month highs amid a strong rally in US Treasury bond yields. That said, the diminishing odds of imminent Fed action in the near future have kept USD bulls from placing aggressive bets. This, along with a strong equity market rebound, extended some support to the perceived riskier Aussie and helped AUD / USD to hold above the 0.7300 mark.
However, the inability of the AUD / USD pair to register a meaningful rally suggests that the recent bearish pressure may still be far from over. This, in turn, favors bearish traders and supports the prospects of an extension of the depreciation movement. In the absence of major economic releases in the US market, the pair remains at the mercy of the broader sentiment of market risk and dollar price dynamics.