- AUD/USD gains strong positive traction on Monday and is supported by a combination of factors.
- Falling US bond yields undercut the dollar and offer support to the aussie amid boosting risk appetite.
- Aggressive Fed expectations could limit dollar losses ahead of Wednesday’s US CPI report.
The pair AUD/USD it hits a four-day high during the early American session and the bulls are now aiming to reclaim the key psychological level of 0.7000.
The US dollar finds itself in fresh supply on the first day of a new week and parses some of Friday’s strong gains post-NFP, which, in turn, acts as a tailwind for the AUD/USD pair. The dollar’s weakness could be attributed to a further decline in US Treasury yields. Aside from this, the risk boost appears to further undermine the safe-haven dollar and benefit the risk-sensitive Aussie.
However, growing concerns about the global economic slowdown, along with tensions between the US and China over Taiwan, could dampen any upbeat movement in the markets. Additionally, speculation of a further Fed rate hike in September should act as a tailwind for US bond yields and lend support to the dollar. This, in turn, could limit any significant rise in the AUD/USD pair, at least for now.
Investors may also prefer to stay on the sidelines ahead of the latest US consumer inflation figures, due for release on Wednesday. Against the backdrop of the upbeat monthly US employment report, stronger CPI data would reaffirm the Fed’s expectations and give the dollar a further boost. The fundamental backdrop warrants caution before placing aggressive bullish bets on the AUD/USD pair.
Meanwhile, US bond yields will play a key role in influencing dollar price dynamics amid the absence of market-relevant economic releases on Monday. Aside from this, traders will take cues from the broader market risk sentiment to take advantage of short-term opportunities around the AUD/USD pair.
Technical levels
Source: Fx Street
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