The AUD/USD is extending its losses during the day, down by 0.17%, bouncing off the YTD lows of 0.6436, reached on Monday, as markets calmed. Risk-aversion triggered by a bold move of the new UK government spurred a global bond sell-off, alongside broad GBP weakness, consequently bolstering the greenback, a headwind for risk-sensitive currencies. At the time of writing, the AUD/USD is trading at 0.6442, below its opening price.

Apart from this, the risk-on impulse - as depicted by a positive tone around the equity markets - undermines the safe-haven buck and further benefits the risk-sensitive aussie. The uptick, however, lacks bullish conviction, warranting some caution before positioning for any meaningful gains.

There are significant prospects of a correction at this juncture, as per the structure highlighted on the chart above and below.

A Fibonacci scale drawn on the latest bearish leg on the daily chart shows prospects of a correction towards the 38.2% ratio ahead of a 50% mean reversion back to test the daily support.

Despite the latest pause in the downside, a clear break of the four-month-old bearish channel’s support line, now resistance around 0.6500, keeps AUD/USD bears hopeful of visiting the 78.6% Fibonacci Expansion (FE) of April-August moves, near 0.6360.

Furthermore, a more hawkish stance adopted by the Federal Reserve should act as a tailwind for the buck and contribute to capping the AUD/USD pair.  It is worth recalling that the US central bank signalled last week that it will likely undertake more aggressive increases at its upcoming meetings to cap inflation.

AUDUSD Hovering Above Weekly Order block

Sep 27 2022

Stop Loss -0.88%

Holding time 11hr

0.64264

Entry price

0.63698

Stop loss price