AUD/USD grinds higher past 0.6700 on Credit Suisse news, comments from RBA’s Kent, Fed eyed

• AUD/USD cheers risk-on mood, cautiously optimistic comments from RBA’s Kent.
• RBA’s Kent conveys soundness of Aussie banks, defends rate hike moves.
• Hopes that UBS buyout of Credit Suisse could tame bond market rout favor the sentiment.
• RBA Meeting Minutes, preliminary PMIs for March and FOMC Meeting are the week’s key events to watch for clear directions.

AUD/USD remains mildly bid above 0.6700, around 0.6715 by the press time, as upbeat comments from the Reserve Bank of Australia (RBA) Official joins the market’s cautious optimism over the UBS-Credit Suisse deal during early Monday. However, fears of more banking sector rout and anxiety ahead of this week’s top-tier data/events probe the Aussie pair buyers of late.

Christopher Kent, Assistant Governor (Financial Markets), gave a speech on "Long and Variable Monetary Policy Lags" at the KangaNews Debt Capital Market Summit, in Sydney, early Monday morning in Asia-Pacific. The policymaker initially followed the suit of global central bankers while trying to rule out fears of the US and European banking sector fallout. More importantly, RBA’s Kent said that RBA is very conscious of the challenges facing borrowers from rapid rate rises.

Also read: RBA’s Kent: Australian banks are unquestionably strong

Apart from the cautious optimism spread by comments from RBA’s Kent, news that the UBS is up for buying the troubled Credit Suisse also offered a sigh of relief to the market sentiment and propelled the risk-barometer AUD/USD pair.

It should, however, be noted that the news shares by Reuters suggesting two more banks are struggling in Europe seemed to have poked the AUD/USD bulls. On the same line could be the market’s cautious mood ahead of the key Federal Reserve (Fed) Monetary Policy meeting. Also testing the Aussie pair could be the major central banks’ coordinated efforts to bolster the US Dollar via swaps also seemed to have underpinned the US Dollar. That said, Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, Swiss National Bank are all up for announcing joint actions to provide more liquidity via standing US dollar liquidity swap line arrangements.

During the last week, the fallout of the US and European banks propelled the market’s move towards the US bond and Gold, which in turn drowned the US Dollar while fuelling the AUD/USD prices. In addition to the downbeat yields, the US Dollar also had to bear the burden of downbeat US inflation and Retail Sales data.

On Friday, US Consumer Confidence per the University of Michigan's (UoM) Consumer Confidence Index dropped to 63.4 for March versus 67.0 expected and prior. The details suggest that the year-ahead inflation expectations receded from 4.1% in February to 3.8%, the lowest reading since April 2021, while the 5-year counterpart dropped to 2.8% from 2.9% previous reading. Furthermore, US Industrial Production remained unchanged in February versus 0.2% expected and January's 0.3% (revised from 0%) expansion.

Amid these plays, Wall Street closed with losses and the US two-year Treasury bond yields dropped the most in three years.

Having witnessed the initial market reaction to comments from RBA’s Kent, AUD/USD traders may have to rely on the risk catalysts amid a light calendar on Monday, as well as a cautious mood ahead of the key Federal Open Market Committee (FOMC) monetary policy meeting. It's worth noting that Tuesday’s RBA Meeting Minutes and Thursday’s preliminary readings of Australia’s March month S&P Global PMIs will also be important to observe for fresh impulse.

Technical analysis

A clear upside break of six-week-old descending resistance line, now immediate support around 0.6630, directs AUD/USD buyers towards the 200-DMA hurdle of near 0.6765.