AUD/USD holds losses around 0.7130 amid a sour market mood

AUD/USD consolidates around 0.7130 after dropping from weekly highs at 0.7185.
Growing geopolitical tensions have been buoying the safe-haven USD this week.
FX analysts at UOB expect the pair to oscillate between 0.7080 and 0.7180 in the coming weeks.

Guillermo Alcala FXStreet

The Australian Dollar (AUD) posts marginal gains against the US Dollar (USD) on Friday, but remains near 10-day lows of 0.7110, with upside attempts capped below 0.7135 so far. A stronger US Dollar amid fading hopes of an imminent peace deal in Iran is keeping speculative traders away from the Aussie.

Risk-sensitive assets like AUD are on their back foot on Friday, as tensions in the Middle East escalate. US President Trump urged Tehran to sign a peace deal, while Israel said that it is waiting for a “US green light” to restart its attacks on Iran.

Tehran, on the other hand, has threatened with an “eye for an eye” warning that they will target oilfields in Gulf countries allied with the US, if Iranian energy sites are attacked.

In this context, all eyes will be on the conference by US Defense Secretary Pete Hegseth and the Chair of the Joint Chiefs of Staff, Dan Caine, who are expected to explain the Operation Epic Fury against Iran on Friday at 08:00 ET (12:00 GMT).

From a wider perspective, the AUD/USD pair keeps trading in a range after rejection at the 0.7220 area in mid-April. FX analysts at UOB expect this trend to extend over the next few weeks: “In our most recent narrative from Monday (20 Apr, spot at 0.7130), we highlighted that the current price movements are likely part of a range-trading phase between 0.7060 and 0.7210. Since then, AUD has traded in a relatively quiet manner. We continue to expect range trading, but a narrower range of 0.7080/0.7180 is likely enough to contain the price movements for now."

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

Author

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

AUD/USD tests six-week low as Trump rattles markets

The Aussie Dollar edges lower, some 0.25% against the Greenback on Tuesday as the market mood turned sour due to Trump's threats to retaliate against Iran after a helicopter was downed in the Strait of Hormuz. The AUD/USD trades at 0.7027 after testing a six-week low of 0.7005.

USD/JPY: Japanese Yen round-trips Tokyo's record intervention just in time for CPI

Six weeks ago Japan reportedly spent a record sum dragging this pair off exactly this shelf. On Tuesday, USD/JPY ground from an early low near 160.00 to a session high just shy of 160.50, its strongest level since the late April spike that triggered intervention, before settling just beneath the high into the close.

Gold slumps below $4,250 on renewed US-Iran tensions, US CPI data in focus

Gold price attracts some sellers to around $4,235, the lowest since March 23, during the early Asian session on Wednesday. The precious metal extends its downside on renewed tensions in the Middle East and rising expectations of a US interest rate hike this year. The release of the US May Consumer Price Index inflation data will be in the spotlight later on Wednesday.

Bitcoin sell-off pushes over 50% of circulating supply into loss, hinting at market bottom

Bitcoin dropped near $61,000 on Tuesday, with the latest sell-off pushing long-term market indicators toward levels historically associated with bear-market bottoms, according to a report by K33 Research.

When the chips are down, the AI tape starts to shake

The market came into Tuesday trying to sell investors the comforting ”Turnaround Tuesday” idea that Friday’s AI fracture was just another pothole on the road higher. By the close, that story had lost its bid. Monday’s dead cat bounce had done what dead cat bounces always do.

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.