- AUD/USD receives some offers on the first day of a new week, although it lacks follow-through.
- Bets on a further 25 basis point Fed rate hike support the dollar and act as a headwind for the pair.
- The positive risk tone limits the dollar as a safe haven and supports the risk-sensitive Australian dollar.
The pair AUD/USD attracts some buying on the first day of a new week and halts Friday’s rejection slide from the 0.6800 level, or the 100-day simple moving average (Kagi). The pair held a slightly positive tone midway through the European session, although they seem to be having a hard time capitalizing on the move and lacking bullish conviction.
The US dollar (USD) is gaining ground for the second day in a row and pulling away from the one-year lows reached on Friday, which in turn works against the AUD/USD pair. Federal Reserve (Fed) Governor Christopher Waller called for further rate hikes on Friday, saying the job was not done yet as inflation was still too high. In addition, the preliminary report from the University of Michigan showed that one-year inflation expectations rose to 4.6%, from 3.6% in March, and raised bets for a further 25 basis point hike at the next policy meeting. FOMC policy in May. This remains support for high US Treasury yields and continues to support the dollar.
However, market participants remain convinced that the Fed will pause its rate hike cycle sooner rather than later. This, coupled with a generally positive tone around equity markets, discourages traders from making aggressive bullish bets on the safe-haven dollar and supports the risk-sensitive Aussie. The mixed fundamental background makes it prudent to wait for a strong follow-through move in either direction before positioning for a firm intraday direction. Investors are also reticent about the publication of the minutes of the last meeting of the Reserve Bank of Australia (RBA) and the publication of Chinese data on Tuesday, in a context in which the recovery of the second world economy is losing strength.
Meanwhile, the US economic calendar, with the release of the Empire State Manufacturing Index, will factor into short-term AUD/USD trading. Additionally, US bond yields, coupled with broader market risk sentiment, could influence USD price dynamics and help create near-term opportunities.
Technical levels to watch
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.
