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AUD / USD is moving higher and closer to 0.7750

  • AUD / USD regains positive traction on Monday and builds on Friday’s bounce from the 0.7675 area.
  • The Fed’s pessimistic expectations and risk appetite weigh on the safe-haven USD and support the pair’s upward move.
  • Low liquidity due to the US holiday could prevent bulls from opening aggressive positions ahead of Tuesday’s RBA.

The pair AUD/USD is extending its steady intraday upward move during the first half of Monday’s European session, climbing to new daily highs around the 0.7735-40 region in the last hour.

Having defended the 0.7700 level, the pair has regained some positive traction on the first day of a new trading week and has extended Friday’s bounce from the 0.7675 region, the lowest level since April 14. The Fed will maintain its ultra-flexible monetary policy for a longer period. This, in turn, has been seen as a key factor that has provided a modest rise to the AUD / USD pair.

Investors now seem to be aligned with the Fed’s stubbornly pessimistic view that any rise in prices would turn out to be temporary. This has been evident by a fairly dovish market reaction to stronger-than-expected US inflation data on Friday. In fact, the underlying PCE price index, the Fed’s preferred inflation indicator, jumped to 3.1% year-on-year in April, validating the higher inflation narrative, although it did little to provide a significant boost to the USD.

Apart of this, underlying bullish sentiment in financial markets has weighed further on the safe-haven US dollar and it has benefited the Australian dollar and increased perceived risk. Supporting factors have helped to counteract China’s unimpressive economic data, which suggested that momentum in manufacturing may have peaked. The official Chinese manufacturing PMI slowed slightly to 51 points in May from 51.1 seen in the previous month.

Now it will be interesting to see if the AUD / USD pair is able to capitalize on the positive move or finds new selling at higher levels amid tight liquidity due to a bank holiday in Britain and the United States. Investors may also refrain from opening aggressive positions and prefer to wait on the sidelines. before the RBA’s last monetary policy decision, scheduled during the Asian session on Tuesday.

AUD / USD technical levels

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