Title: AUD/USD eases from one-week high, downside seems limited amid weaker USD

November 25,2022 03:27 AM ET

By:AnalysisWatch

The AUD/USD pair is struggling to capitalize on the gains recorded in the last three trading days, giving back from the one-week high reached on Friday after retesting the November 15-16 high at 0.6780.

The pair traded slightly lower in early European trade and is currently hovering around the mid-0.6700s, although another pullback seems hard to imagine.

Concerns over the worsening COVID-19 situation in China are dampening the recent bullish move in the markets, which in turn is acting as a headwind for the risk-sensitive Aussie. Indeed, China has announced strict bans following a record increase in daily COVID-19 cases in several major cities. This, in turn, is adding to concerns about a further slowdown in economic activity and dampening investor appetite for perceived riskier assets.

However, the AUD/USD pair's downtrend remains cushioned, at least for now, by bearish underlying sentiment towards the US dollar. The minutes of the November Federal Open Market Committee (FOMC) meeting, released on Wednesday, show that a clear majority of policymakers believe that a rate hike in the near future is appropriate. This extends the recent decline in U.S. government bond yields and continues to undermine the value of the greenback.

Meanwhile, the mixed fundamental environment warrants some caution before committing to a firm short-term direction for the AUD/USD pair. Moreover, the relatively low trading volumes may discourage traders from aggressive betting and support the prospects of a continuation of the consolidative price movement on the last day of the week.