The Australian dollar is in negative territory in the Wednesday session. Currently, AUD/USD is trading at 0.7202, down 0.51% on the day. The Aussie continues to struggle and is down 1.70% in the month of September.
Retail Sales falter
Australia’s economy continues to grapple with prolonged Covid lockdowns, as the delta variant has paid scant attention to the island nation’s attempt to avoid Covid by isolating from the rest of the world. With only about 40% of Australians fully vaccinated, the government has been forced to combat Covid with health restrictions such as lockdowns. This has dented economic growth, and Retail Sales fell for a fifth straight month, with a reading of -1.7% in August. The economy will likely show negative growth in the third quarter, which will likely weigh further on the struggling Australian dollar.
The US dollar has headed higher as the markets price in a taper by the Federal Reserve. Powell told lawmakers that high inflation could last longer than anticipated, warning that inflation “will likely remain so in coming months before moderating”. Powell has long insisted that high inflation is transient, but his latest comments will strengthen expectations that the Fed will finally taper its bond purchase program before the end of the year.
Fed President James Bullard was even more hawkish than Powell, as he urged the Fed to act aggressively in the face of high inflation, which could mean two rate hikes in 2022. US Treasury yields have moved higher in response to the comments from Powell and Bullard, propelling the US dollar upwards. The dollar index has climbed to 0.9407, up 0.33% on the day, and with tapering appearing imminent, the US dollar could extend this week’s gains.
- There is resistance at 0.7311, followed by 0.7362
- The pair is testing support at 0.7215. Below, there is support at 0.7170
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