On Thursday, there is new purchasing in the AUD/USD pair, although it seems complicated to profit from the trend. The positive Australian employment report helps the local currency despite a slight USD decline. The key limiting factors are fears of a banking catastrophe and hawkish Fed predictions.
On Thursday, the AUD/USD pair regains momentum and undoes a significant portion of the previous day’s decline to below 0.6600, or the weekly low. Nevertheless, the pair retreats a few pips from the daily top reached during the first half of the European session and is now trading in the range of 0.6640–0.6645, still up over 0.40% for the day.
Positive developments in the Credit Suisse scandal and encouraging Australian employment data prove to be essential drivers supporting the AUD/USD pair amid a mild US Dollar decline. In reality, the struggling Swiss bank said on Thursday that it would use a choice to borrow up to $54 billion from the Swiss National Bank (SNB) to support liquidity. The Australian dollar gained more strength after news from the Australian Bureau of Statistics (ABS) that the unemployment rate in February reverted to the lowest level seen since the 1970s, recorded in December.
Yet, worries about a broader systemic risk remain, particularly in light of the failure of two mid-sized US banks this week, Silicon Valley Bank and Signature Bank. This is clear from the generally cautious atmosphere around the equities markets, which is detrimental to the risk-averse Australian. In addition, anticipation that the Fed will increase interest rates by at least 25 basis points at its forthcoming meeting on March 21–22 helps restrain additional losses for the safe-haven Greenback and further helps restrict the upside for the AUD/USD pair, at least temporarily.
The aforementioned underlying context favors AUD/USD bears, as does the Reserve Bank of Australia’s (RBA) recent dovish tack, which hinted that it might be reaching the end of its rate-hiking cycle. The recurrent inability of this week to gain acceptance above the 0.6700 round-figure level suggests that the path of least resistance for spot prices is negative, even from a technical standpoint. The US economic docket, which includes the Philadelphia Fed Manufacturing Index, Building Permits, and Housing Starts, is currently being watched by market investors for a new impetus.