- AUD/USD extends its sideways consolidation move on the first day of a new week.
- The recent rally in commodity prices benefits the AUD.
- A softer risk tone and dovish expectations from the Fed benefit the USD and limit the pair’s upside.
The pair AUD/USD trades within a tight range at the start of the European session on Monday and consolidates recent strong gains to new yearly highs. At time of writing, the pair is up 0.16% on the day, trading at 0.7527.
A combination of divergent factors failed to provide any significant lift to the AUD/USD pair and led to subdued, range-bound price action on the first day of a new week. The recent rally in commodity prices continued to lend some support to the Australian dollarcurrency linked to the prices of raw materials, although sustained buying around the US dollar capped any significant gains in the pair.
The USD was supported by the growing acceptance that the Fed would adopt a more aggressive response to combat stubbornly high inflation. Indeed, markets have been pricing in a 50 basis point rate hike at the May meeting. This, in turn, pushed the benchmark 10-year US government bond yield to a new two-year high and supported the dollar.
Apart of this, the prevailing cautious sentiment in the markets further benefited the safe-haven USD. In the context of a lack of progress in the peace negotiations between Russia and Ukrainethe imposition of a new lockdown in china due to coronavirus weighed on investor sentiment. This prevented the pair’s bulls from opening aggressive bullish positions and capped the AUD/USD’s rally.
There are no major economic data releases from the US on Monday, leaving the dollar at the mercy of US bond yields. Aside from this, investors will take cues from the broader market risk sentiment. This coupled with commodity prices should provide some momentum to the AUD/USD pair and allow investors to take advantage of some short-term opportunities.
AUD/USD technical levels
Source: Fx Street
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