AUD/USD breaks above 0.6700 against a backdrop of weak USD and falling US yields.

• AUD/USD rises as market participants await a turnaround from the US Federal Reserve in its monetary policy stance.
• Susan Collins of the Boston Fed argues that the Fed will hold rates steady after a future hike.
• Thomas Barkin of the Richmond Fed says the turmoil at Credit Suisse has eliminated the possibility of a 50 basis point rate hike.

the australian dollar (AUD) rises against the US dollar (USD), which continues to weaken across the board, as shown by a basket of six currencies, the dollar index. Additionally, US Treasury yields are falling, and US stocks are rising, which paints a difficult picture for the US currency. At the time of writing, the AUD/USD pair is trading at 0.6701.

The dollar weakened on the fall in US bond yields after the weak employment data

Risk appetite remains the main driver after the problems of the banking crisis eased. The financial markets narrative once again focused on central banks, although not on inflation but on regulation. However, Federal Reserve officials such as Boston Fed President Susan Collins and Richmond’s Thomas Barkin made briefings and discussed monetary policy.

Susan Collins of the Boston Fed said getting low inflation justifies not lowering rates. She added that the US Federal Reserve (Fed) would hold rates steady after a further hike. Richmond Fed President Thomas Barkin commented that fighting inflation would take some time and that the turmoil at Credit Suisse ruled out the possibility of a 50 basis point rate hike.

Despite both Fed officials being slightly hawkish, investors had begun to price in the possibility of no change in the Fed Funds Rate (FFR) at the upcoming meeting in May. Therefore, the AUD/USD has been supported by a likely change in the monetary policy stance of the US central banks, although the inflation data will be released on Friday.

On top of this, US jobs data showed that the job market is cooling off, with initial jobless claims last week beating estimates. At the same time, US gross domestic product (GDP) for the fourth quarter of 2022 was 2.6%, below forecasts of 2.7%.

On the Australian front, the latest inflation report surprised the market as inflation was lower than expected. Rumors are growing among financial analysts that the Reserve Bank of Australia (RBA) may pause raising rates over the next week.

AUD/USD Technical Analysis

The AUD/USD pair is approaching the 20-day EMA at 0.6696, consolidating within a tight 70-point range over the past three trading days. Although oscillators remain in bearish territory, such as the Relative Strength Index (RSI), the Rate of Change (RoC) is bullish. Therefore, the mixed signals warrant caution.

If the AUD/USD breaks higher, it will face resistance from the 50 day EMA at 0.6753, followed by the 100 and 200 day EMAs at 0.6771 and 0.6821, respectively. On the other hand, the first level of demand for AUD/USD would be the March 24 low at 0.6625, followed by the 0.6600 figure.