AUD/USD clings to intraday gains around 0.6900 mark, lacks bullish conviction
- AUD/USD gains some traction on Monday and recovers further from a nearly two-month low,
- Rising Copper prices seem to benefit the resources-linked Aussie amid subdued USD demand.
- Recession fears, hawkish Fed expectations favour the USD bulls and seem to cap the upside.
- Traders now look to the RBA meeting minutes for some impetus ahead of the FOMC minutes.
The AUD/USD pair builds on Friday’s goodish rebound from the vicinity of the 0.6800 mark, or its lowest level since January 6, and gains strong follow-through traction on the first day of a new week. The pair maintains its bid tone through the early part of the European session and is currently placed around the 0.6900 mark, just a few pips below the daily high.
Some optimism over a potential recovery in China, along with supply disruptions in Panama, lend support to Copper prices and benefit the resources-linked Australian Dollar. Apart from this, subdued US Dollar price action turns out to be a key factor acting as a tailwind for the AUD/USD pair. That said, the fundamental backdrop still seems tilted in favour of bearish traders and warrants caution before positioning for any meaningful upside.
Against the backdrop of looming recession risks, geopolitical tensions weigh on investors’ sentiment and should cap the AUD/USD pair. In fact, North Korea launched two more ballistic missiles off its east coast on Monday after firing an intercontinental ballistic missile (ICBM) into the sea off Japan’s west coast over the weekend. Adding to this, talks of Russia ramping up attacks in Ukraine should keep a lid on the risk-sensitive Aussie.
Moreover, firming expectations that the Federal Reserve (Fed) will stick to its hawkish stance in the wake of stubbornly high inflation favours the USD bulls. Traders also seem reluctant ahead of the release of the policy meeting minutes from the Reserve Bank of Australia (RBA) on Tuesday and the Fed on Wednesday. This further makes it prudent to wait for strong follow-through buying before confirming that the AUD/USD pair has formed a bottom.