AUD/USD drops back to test 0.7250 as risk-off grips Europe

• UK leadership challenge triggers risk-off, boosting the demand for the USD.
• Headed back towards Thursday”s low at 0.7232 ahead of US industrial figures.

The USD bulls staged a solid comeback amid a renewed risk-aversion wave that the gripped the European markets amid fresh UK political concerns, lifting the safe-haven US dollar at the expense of the higher-yielding Aussie.

AUD/USD: Bears taking back charge

The latest reports of the leadership challenge underway against the UK PM Theresa May added to ongoing concerns over a potential disorderly Brexit and spooked markets, with the European equities quickly paring back early gains, as the risk assets take a hit.

As a result, the Aussie is seen heading back for a test of yesterday’s low reached at 0.7232 levels while the US dollar index bounces back to 96.95, having posted daily lows at 96.77. Despite the latest leg down, the OZ currency remains supported by solid Australian employment data, with markets now expecting an RBA rate hike by mid-2019.

Attention now turns towards the sentiment on the Wall Street and the US industrial production release for fresh trading impetus on the Aussie dollar.

AUD/USD Technical Levels