- AUD/USD is trading in a tight range on Monday and is influenced by a combination of factors.
- Looming recession risks weigh on investor sentiment and cap gains for the risk-sensitive Australian dollar.
- A modest pullback in the USD lends some support to the major currencies and helps limit any significant decline.
The pair AUD/USD It struggles to capitalize on modest gains on Friday and oscillates between tepid gains and minor losses during the first half of the European session on the first day of a new week. The pair is currently trading around the 0.6650 zone, almost unchanged on the day, and is influenced by a combination of factors.
Concerns about slowing global growth, coupled with US debt ceiling issues, weigh on investor sentiment and prove to be a key factor acting as a headwind for the risk-sensitive Aussie. Apart from this, expectations that the Reserve Bank of Australia (RBA) could refrain from raising rates in June, bolstered by last week’s disappointing Australian jobs data release, are helping to cap the AUD/ USD. However, the downtrend is dampened by the slightly softer tone surrounding the US dollar (USD).
In fact, the dollar index (DXY), which tracks the greenback against a basket of currencies, remains on the defensive for the second day in a row, pulling away from the two-month highs hit on Friday. The surprise collapse of the US debt ceiling negotiations fuels fears of an unprecedented default. This, together with less aggressive statements from Federal Reserve (Fed) Chairman Jerome Powell, triggers a further decline in US Treasury yields and continues to undermine the dollar.
In the absence of market-relevant economic releases on Monday, traders also appear reluctant ahead of a key meeting between President Joe Biden and Republican House Speaker Kevin McCarthy to discuss the debt ceiling. Beyond this, US bond yields, coupled with broader risk sentiment, will influence USD price dynamics and provide some momentum for AUD/USD. Markets’ attention will be focused on the release of the Australian and US preliminary PMI indices on Tuesday.
technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
