AUD/USD plunged on Syria tension

Australian dollar lost positions considerably against its US counterpart on Tuesday, as concerns appeared that the United States might consider a military intervention in Syria, which boosted demand for the greenback.

AUD/USD plunged to its lowest point since August 22nd, currently the session low, at 0.8944 at 6:22 GMT, after which consolidation followed at 0.8960. Support for the pair was expected at August 6th low, 0.8907, while resistance was to be encountered at August 26th high, 0.9070.

The Aussie slid against all of its major peers, as volatility headed for the highest close in six weeks, which dimmed demand for the national currency. One-month volatility rose by 20 basis points, or 0.20%, to reach 12.8%.

“Volatility does pick up in and around large turning points in U.S. monetary policy, and we are on the cusp of one at the moment,” said Peter Dragicevich, a currency economist in Sydney at Commonwealth Bank of Australia (CBA), cited by Bloomberg. “Increased volatility historically has placed some downward pressure on the Aussie.”

Meanwhile, markets remained edgy after US Secretary of State John Kerry said that President Barack Obama will hold Syrian government accountable for the “moral obscenity” of using chemical weapons. This caused investors to abandon higher-risk assets and to seek safe haven currencies, such as the US dollar.

On the other hand, recently released data points out of the United States cast a shadow over the prospect that the Federal Reserve Bank will consider tapering of its asset purchases as early as September. On Monday the Department of Commerce said that total durable goods orders in the United States dropped by 7.3% to 226.3 billion USD in July, while the median estimate pointed a lesser decrease, by 4.0%, as this data raised concerns over domestic demand.

This indicator came out after on Friday it was reported that US new home sales declined at a faster than projected pace of 13.4% in the month of July, also marking the most considerable drop in over three years.

Elsewhere, the Aussie plummeted against the euro as well, with EUR/AUD cross advancing 0.84% to trade at 1.4938 at 7:46 GMT. In addition, AUD/NZD pair added a mere 0.02% for the day to trade at 1.1506 at 7:48 GMT.