- AUD/USD struggles to gain significant traction and range-bound on Monday.
- The positive risk tone supports the risk-sensitive Aussie amid subdued demand for the USD.
- The recovery in US bond yields acts as a tailwind for the dollar and limits the pair’s upside.
The pair AUD/USD It lacks firm intraday direction on Monday and oscillates in a tight trading range around 0.6650 until the middle of the European session. The pair, meanwhile, remains very close to the more than a week lows hit on Friday and looks vulnerable to extending last week’s decline of rejection from a technically significant 200-day SMA.
The generally positive tone in equity markets, bolstered by fading fears of a full-blown banking crisis, turns out to be a key factor offering some support to the risk-sensitive Australian. News that First Citizens Bank & Trust Company will purchase all of Silicon Valley Bank’s deposits and loans from the Federal Deposit Insurance Corporation (FDIC) calms market nerves about contagion risk. In addition, reports that the US authorities were in the initial phase of deliberation on the extension of emergency lending facilities boost investor confidence.
On the other hand, the flow of risk appetite does not help the safe-haven dollar (USD) to capitalize on its recent strong recovery from the multi-week low reached last Thursday, helping to limit the fall in the AUD/USD pair. That being said, a strong recovery in US Treasury yields acts as a tailwind for the dollar. This, along with a dovish signal from the Reserve Bank of Australia (RBA) and the Fed pointing to a pause in the rate hike cycle, warrants caution before making aggressive directional bets around the pair.
In the absence of any relevant US economic releases on Monday, US bond yields could influence dollar price dynamics and give the AUD/USD pair some momentum. Apart from this, the broader risk sentiment could produce short-term trading opportunities, although the lack of significant buying suggests that the path of least resistance for the pair is to the downside.
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.
