- A combination of factors pushes AUD/USD to a two-week high on Monday.
- An aggressive signal from the RBA benefits the AUD amid widespread USD weakness.
- Risk appetite drags the USD to a new monthly low and offers support for the pair.
The pair AUD/USD appears to have entered a bullish consolidation phasehovering around the 0.7110-0.7120 area having hit new two-week highs at 0.7127 earlier in the day.
After Friday’s modest drop, the AUD/USD pair attracted fresh buying on Monday and was supported by a combination of factors. The Australian dollar continued to receive support of the aggressive signal from the Reserve Bank of Australia that further rate hikes are still possible in June amid upside risks to inflation. Besides, risk appetite weighed on the safe-haven US dollar and further benefited the higher perceived risk AUD.
Investors were optimistic about the Hope China’s Easing of COVID-19 Restrictions Can Boost Global Economy. This was reflected in a positive tone around equity markets, which pulled money flows away from traditional safe-haven assets and dragged the DXY dollar index to a new monthly low. However, Fed expectations could help limit dollar losses.
The markets have priced in a rate hike of 50 basis points in the next two meetings, although they expect that the US central bank will have to take more drastic measures to control inflation. This, coupled with a rebound in US Treasury yields, supports the prospect of some USD buying, which in turn should cap the AUD/USD pair, at least for now. .
In the absence of any major economic releases from the US, overall risk sentiment and US bond yields will influence dollar price dynamics. Investors will wait for the release of the Australian and US PMIs on Tuesday for significant momentum. However, the focus will be on the release of Wednesday’s FOMC meeting minutes.
AUD/USD technical levels
Source: Fx Street
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