- The risk-on impulse prompted some short-covering around the perceived riskier aussie.
- Hawkish Fed expectations underpinned the USD and might cap the upside for AUD/USD.
- Investors now look forward to the RBA decision on Tuesday for some meaningful impetus.
The AUD/USD pair maintained its bid tone through the mid-European session and was last seen hovering near the top end of its daily trading range, around the 0.7035-40 region.
Having shown some resilience below the key 0.7000 psychological mark, the AUD/USD pair witnessed some short-covering on Monday and recovered a part of the previous day's losses to a fresh YTD low. The global risk sentiment stabilized a bit in reaction to reports from South Africa, suggesting that Omicron patients only had relatively mild symptoms. This, in turn, led to a strong recovery in the equity markets and benefitted the perceived riskier aussie.
The upbeat market mood got an additional boost after the People’s Bank of China (PBOC) slashed the bank's Reserve Requirement Ratio (RRR) by 50bps, releasing 1.2 trillion-yuan long-term liquidity. Despite the supporting factors, the uptick lacked bullish conviction amid the prevalent bullish sentiment surrounding the US dollar. The prospects for a faster policy tightening by the Fed acted as a tailwind for the greenback and might cap gains for the AUD/USD pair.
Investors seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation and have been pricing in the possibility of liftoff by May 2022. Apart from this, rebounding US Treasury bond yields favours the USD bulls. This, in turn, makes it prudent to wait for a strong follow-through buying before confirming that the AUD/USD pair has formed a near-term base and positioning for any further appreciating move.
There isn't any major market-moving economic data due for release from the US, leaving the USD at the mercy of the US bond yields. Apart from this, developments surrounding the coronavirus saga and the broader market risk sentiment will influence the USD price dynamics. This should provide some impetus to the AUD/USD pair ahead of the RBA policy decision on Tuesday.
Technical levels to watch
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
USD/JPY holds positive ground around 151.50 following Japanese CPI data
The USD/JPY pair holds positive ground for the second consecutive day near 151.45 on Friday during the early Asian trading hours. The cautious approach from the Bank of Japan to keep monetary conditions accommodative exerts some selling pressure on the Japanese Yen.
AUD/USD depreciates on risk aversion amid a stronger US Dollar
AUD/USD extends its losses for the second successive session on Friday. However, market activity is expected to be subdued due to light trading on Good Friday. Meanwhile, the US Dollar strengthens as recent data indicates annualized economic expansion in the United States, driven by consumer spending.
Gold price finishes Thursday’s session set to reach new all-time highs
Gold price rallied during the North American session on Thursday and hit a new all-time high of $2,225 in the mid-North American session. Precious metal prices are trending higher even though US Treasury yields are advancing, underpinning the Greenback.
Top 3 Price Prediction BTC, ETH, XRP: Retail watches from the sidelines with a bias for shorts
Bitcoin is showing strength as markets head into the Easter holidays. As it rises, altcoins are following suit, with Ethereum and Ripple posting almost similar gains. Meanwhile, there remains an unfilled CME Gap, with a lot of liquidity also resting above and below BTC price.
Bears have been standing before a steamroller so far this year
Despite a pushback on rate cuts from Christopher Waller, and what was supposed to be cautious trading sentiment ahead of critical US inflation data released later on Friday, the S&P 500 rose on Thursday, marking its best first-quarter performance in five years.