Forex Market: AUD/USD registers a two-week low on sharp drop in oil prices, Fed Chair Powell’s Congressional testimony now eyed

AUD/USD retreated to a two-week low on Tuesday, as the US Dollar rose ahead of Fed Chair Powell’s testimony later in the day while the Aussie took a hit from a steep drop in oil prices.

The black liquid retreated over 3% on Tuesday due to concerns that fresh pandemic-related restrictions and slow vaccine roll-outs across continental Europe would probably hamper fuel demand recovery, while oil producers slashed prices, signalling sufficient supply.

“We have seen some of the commodity markets still underperforming after the sell-off in oil on Thursday, and that has really hit some of these commodity-related currencies such as the Aussie, the kiwi and the Canadian dollar,” Steven Dooley, APAC currency strategist at Western Union Business Solutions, said.

As of 9:51 GMT on Tuesday AUD/USD was retreating 0.96% to trade at 0.7670, after earlier touching an intraday low of 0.7669, or its weakest level since March 10th (0.7668). The currency pair has edged down 0.43% so far in March, following a 0.88% surge in February.

In terms of economic calendar, today market players will be expecting the Congressional testimony by Fed Chair Jerome Powell and Treasury Secretary Janet Yellen.

The US Dollar’s appeal has been further bolstered, as the central bank seemed to tolerate the recent surge in bond yields.

“The market is interested in how far U.S. bond yields will rise. While top Fed officials have said they will keep interest rates low through 2023, there could be dissenting voices,” Yukio Ishizuki, senior strategist at Daiwa Securities, was quoted as saying by Reuters.

Additionally, several other Federal Reserve officials are scheduled to make speeches.

Bond Yield Spread

The spread between 2-year Australian and 2-year US bond yields, which reflects the flow of funds in a short term, equaled -5.5 basis points (-0.055%) as of 9:15 GMT on Tuesday, up from -6.2 basis points on March 22nd.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7735
R1 – 0.7766
R2 – 0.7788
R3 – 0.7819
R4 – 0.7850

S1 – 0.7713
S2 – 0.7682
S3 – 0.7660
S4 – 0.7639