- AUD/USD gains strong positive traction for the third straight day amid a weaker USD.
- The uncertainty over the Fed’s rate-cut path and the upbeat mood undermine the US Dollar.
- Traders now look to the US macro data for some impetus ahead of the NFP on Friday.
The AUD/USD pair build on this week's goodish rebound from the 0.6480 region, or its lowest level since March 5 and scales higher for the third successive day on Thursday. The momentum lifts spot prices back closer to the 0.6600 mark during the early European session and is supported by the prevalent selling bias surrounding the US Dollar (USD). A survey published by the Institute for Supply Management (ISM) showed that growth in the US services sector lost momentum in March. In fact, the ISM Services PMI dropped to 51.4 from 52.6 in February, while the Prices Paid sub-component declined to 53.4 from 58.6. This, in turn, lifts bets that the Federal Reserve (Fed) will start cutting interest rates in June, which led to the overnight downfall in the US Treasury bond yields. This, along with a positive risk tone, is seen undermining the safe-haven Greenback and benefiting the risk-sensitive Australian Dollar (AUD).
Meanwhile, Automatic Data Processing reported that US private sector employment rose by 184K in March against the 148K expected and the previous month's upwardly revised reading of 155K. Adding to this, Fed Chairman Jerome Powell did not specify the timing or scale of the potential rate cuts and said that it would take a while to evaluate the current state of inflation before lowering the borrowing costs. This helps limit the downside for the US Treasury bond yields, which, along with persistent geopolitical risk, should limit the ongoing USD corrective slide from its highest level since February 14. Apart from this, the dovish Reserve Bank of Australia (RBA) meeting minutes released earlier this week, indicating that policymakers did not consider the case for an interest rate hike in March, might cap the AUD/USD pair.
Market participants now look forward to the US economic docket, featuring the release of the usual Weekly Initial Jobless Claims and Trade Balance data. This, along with speeches by FOMC members, the US bond yields and the broader risk sentiment, will drive the USD demand and provide some impetus to the AUD/USD pair. The focus, however, will remain glued to the crucial US labor market report on Friday, which, in turn, warrants some caution before placing fresh directional bets and positioning for any further appreciating move for spot prices.
Technical Outlook
From a technical perspective, any subsequent move beyond the 0.6600 mark, or the 100-day Simple Moving Average (SMA), could attract some sellers near the 0.6630-0.6635 supply zone. This, in turn, might cap the AUD/USD pair near the monthly swing high, around the 0.6665-0.6670 region. Some follow-through buying will be seen as a fresh trigger for bullish traders and lift spot prices beyond the 0.6700 mark, towards testing the next relevant hurdle near the 0.6725-0.6730 area.
On the flip side, weakness back below the 200-day SMA, currently pegged near the 0.6550-0.6545 region, could make the AUD/USD pair vulnerable to challenge the 0.6500 psychological mark. This is closely followed by the 0.6480 region, or a near one-month low, which if broken decisively should pave the way for additional losses. Spot prices might then slide to the year-to-date low, around the 0.6445-0.6440 region touched in February, en route to the 0.6400 mark and the 0.6355-0.6350 support.
AUD/USD daily chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.