AUD/USD extends decline from 0.6330 high to 0.6250 area

• The aussie retreats from 0.6330 and reaches 0.6250 low.
• The greenback rallies on Fed tightening hopes and higher US yields.
• AUD/USD might revisit 2020 lows at 0.5506 – Credit Suisse.

The Australian dollar is giving away previous gains on Wednesday, weighed by a stronger US dollar in a deteriorated market mood. The pair has pulled back from Tuesday’s high at  0.6330, returning to the mid-range of 0.6200.

The USD appreciates as risk appetite ebbs

The positive risk sentiment seen over the last two days faded on Wednesday. The major stock markets are going through moderate declines, which is undermining demand for the risk-sensitive Australian dollar.

The greenback is going through a strong recovery, fuelled by hopes of another aggressive Fed rate hike in November. In this backdrop, US Treasury bonds have pushed higher, with the benchmark 10-year note jumping to levels above 4% for the first time since the 2008 financial crash.

Besides, the Reserve Bank of Australia’s decision to slow down the pace of monetary tightening has increased negative pressure on the Australian Dollar.

AUD/USD could revisit 2020 low at 0.5506 – Credit Suisse

FX analysts at Credit Suisse maintain their negative outlook on the pair and warn about further decline to 0.5506: “AUD/USD maintains its medium-term downtrend and (…) we continue to look for further sustained downside (…) We expect a fall to the 78.6% retracement of the 2020/21 uptrend and the low from April 2020 at 0.6041/5978 initially. Whilst we would stay wary of another pause here, a convincing break lower would be seen to open the door for a move all the way to 0.5506 – the low of 2020.”

Technical levels to watch