AUD/USD retreats from 0.7500 down to 0.7477 amid risk-on market sentiment

• The Aussie dollar advances amid risk-on market sentiment in the financial markets.
• The Fed bond taper announcement is perceived as positive for the US dollar, portrayed by the AUD/USD pair. 
• Fed’s Chairman Powell: “If we see persistent inflation, we will use our tools.”

The Australian dollar climbs for the second consecutive day, trading at 0.7489 during the New York session at the time of writing. Investors sentiment is positive, as heavy-tech US companies will reveal earnings for the Q3, while US T-bond yields fell, while the US dollar gains.

Despite broad US dollar strength, risk-sensitive currencies like the AUD, the GBP, and the NZD advance during the day. The US Dollar Index, which tracks the buck’s performance against six rivals, is up 0.25%, sitting at 93.84.

The AUD/USD pair reached a daily high at 0.7504 but retreated the move towards 0.7475. Investors seem nervous to open aggressive bets in the pair, as the Fed bond tapering announcement is nearby, perceived as dollar positive. Contrary, despite reducing its bond purchasing program, the Reserve Bank of Australia had sound dovish as they expressed they would raise rates until 2024.

Also, more market participants start betting that the Federal Reserve will make two hikes by 2022, the first one at the beginning of the second half, while the latter by the end of the year. Furthermore, on Friday. Federal Reserve Chairman Powell said that high inflation would likely last well into next year but added that they still expect it to move back down toward their 2% goal.

Furthermore, he added that “If we see persistent inflation, we will use our tools.”

That said, the AUD/USD price action is confined to remain at familiar levels around 0.7400-0.7500, waiting for a fresh catalyst. 

In the week ahead, the Australian economic docket will feature inflation figures due on Wednesday. The latter, along with the Advance US GDP for the third quarter on Thursday, will help determine the pair’s trend. Meanwhile, the pair direction will lie on the US dollar sentiment as well as the market mood.

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