- AUD/USD attracts fresh buying on Monday and recovers from a more than two-week low.
- A positive risk tone offers support to the risk-sensitive AUD amid a modest decline in the USD.
- Recession fears, US-China tensions and Fed expectations could limit dollar losses.
The pair AUD/USD extends Friday’s late bounce from 0.6870 zone, 2-week low, and gains some positive traction on Monday. The steady intraday rally extends throughout the European session and takes the pair to a new daily high, above the level of 0.6950 in the last hour.
The data of the Chinese trade balance released over the weekend turn out to be a key factor offering support to the Australian dollar. Apart of this, dovish US dollar price action acts as a tailwind for the AUD/USD pair. Softer tone around US Treasury yields keeps dollar bulls on the defensive. This, along with signs of stability in equity markets, is weighing on the safe-haven dollar and driving money flows into the risk-sensitive AUD.
Nevertheless, growing concern about a global economic recession and tension between the US and China around Taiwan should curb any bullish moves in the markets. In addition, the renewed speculation about a more aggressive tightening of monetary policy by the Fed support the perspectives of the appearance of some purchases around the dollar. This, in turn, warrants caution before opening aggressively bullish AUD/USD positions amid the absence of market-relevant economic releases on Monday.
The monthly report on the NFP jobs in the US on Friday showed that the economy added 528,000 jobs in July, beating consensus estimates by a large margin. Other data revealed that the unemployment rate unexpectedly dipped to 3.5% from 3.6% previously. Furthermore, average hourly earnings also beat expectations and rose 0.5% MoM in July, suggesting a further rise in inflationary pressures and raising bets for a 75 basis point Fed rate hike at the next meeting. monetary policy in September.
Therefore, the market’s attention is now focused on the release of the latest US consumer inflation figures, to be released on Wednesday. The data will influence Fed rate hike expectations and will play a key role in driving short-term dollar demand, which in turn should help determine the next directional move for the AUD/USD pair.
AUD/USD technical levels
Source: Fx Street
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