- AUD/USD scales higher for the sixth straight day and climbs to its highest level since February 24.
- The RBA’s hawkish bias continues to underpin the Aussie and remains supportive amid a weaker USD.
- A sustained move beyond the 100-day SMA should set the stage for a further appreciating move.
The AUD/USD pair gains strong follow-through traction for the sixth successive day on Monday and prolongs the momentum through the early North American session. Spot prices reclaim the 0.6800 mark for the first time since February 24, with bulls making a fresh attempt to build on the strength further beyond the 100-day Simple Moving Average (SMA).
The Australian Dollar (AUD) continues to draw support from the Reserve Bank of Australia's (RBA) surprise 25-basis-points interest-rate hike last week and a more hawkish outlook. Adding to this, the RBA's Statement of Monetary Policy (SoMP) released on Friday highlighted that risks for inflation were tilted on the upside and that a further tightening of monetary policy may be required to ensure that inflation returns to target. This, along with a modest US Dollar (USD) weakness, provides an additional boost to the AUD/USD pair and remains supportive of the ongoing positive move.
In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near the monthly low amid growing acceptance that the Federal Reserve (Fed) is approaching the end of its rate-hiking cycles. The Fed Fund futures point to a 90% probability that the US central bank will hold interest rates steady in June. Moreover, the markets have also started pricing in the possibility that the Fed beginning cutting rates in the second half of this year. This, along with worries about a full-blown banking crisis and the US debt ceiling, continues to exert downward pressure on the USD.
Apart from this, the risk-on impulse - as depicted by a generally positive tone around the equity markets - further undermines the safe-haven Greenback and benefits the risk-sensitive Aussie. That said, a goodish intraday pickup in the US Treasury bond yields acts as a tailwind for the USD and could cap gains for the AUD/USD pair in the absence of any relevant economic data from the US. Traders now look to the Australian Retail Sales data and Chinese Trade Balance figures for some impetus during the Asian session on Tuesday, though the focus remains on the US CPI report on Wednesday.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.