- AUD/USD scales higher for the second straight day and climbs to a nearly two-week high.
- Expectations for a less hawkish Fed weigh heavily on the USD and lend support to the pair.
- Fears of a full-blown global banking crisis and the RBA’s dovish shift could cap the upside.
The AUD/USD pair gains strong follow-through traction for the second successive day on Friday and climbs to a nearly two-week high during the first half of the European session. The pair currently trades just above the 0.6700 round-figure mark and is drawing support from a combination of factors.
Multi-billion-dollar lifelines for troubled banks in the US and Europe ease fears about widespread contagion, which, in turn, boosts investors' confidence. This is evident from a modest recovery in the equity markets, which undermines the safe-haven US Dollar and benefits the risk-sensitive Aussie. Apart from this, expectations that the Federal Reserve will adopt a less hawkish stance in the wake of worsening economic conditions weigh on the buck and provide a goodish lift to the AUD/USD pair.
Last week's collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank - forced investors to scale back their bets for more aggressive interest rate hikes by the Fed. In fact, the markets are now pricing in a nearly 90% chance of a smaller 25 bps lift-off at the upcoming FOMC meeting on March 21-22. This leads to a modest downtick in the US Treasury bond yields, which is seen as another factor dragging the USD lower and contributing to the strong bid tone surrounding the AUD/USD pair.
Investors, however, remain worried about the possibility of a full-blown global banking crisis. This, along with looming recession risks, should keep a lid on any optimism in the markets and cap the upside for the AUD/USD pair. Furthermore, the Reserve Bank of Australia's (RBA) recent dovish shift, signalling that it might be nearing the end of its rate-hiking cycle, warrants some caution for aggressive bullish traders and before positioning for any meaningful near-term appreciating move for the major.
Nevertheless, the AUD/USD pair remains on track to end the week on a positive note and reverse a major part of last week's losses to its lowest level since November 2022. Market participants now look to the release of the Michigan US Consumer Sentiment Index for short-term opportunities later during the early North American session on Friday. The focus, however, will remain on the outcome of the highly-anticipated FOMC policy meeting, scheduled to be announced next Wednesday.
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
EUR/USD posts highest daily close since early February Premium
EUR/USD looks on its way to test March highs after posting the highest daily close in almost two months. The pair peaked at 1.0925 on Thursday and then settled around 1.0900. The DXY is under pressure on risk appetite. Key inflation data from the US and the Eurozone will be released on Friday.
GBP/USD eyes 1.2400 as Pound outperforms
The Pound is among the top performers of the American session. GBP/USD is trading at the highest level in almost two months, near 1.2400. Risk flows are helping the pair while at the same time making it difficult for the US Dollar to find demand.
Gold: Bulls aiming to challenge the $2,000 threshold Premium
Spot Gold found demand during American trading hours and currently trades around the $1,980 level. Following a consolidative stage, the bright metal gained upward traction on the back of continued US Dollar weakness.
Cardano might have a bumpy road following a 25% recovery
Cardano price has had a disappointing run these last two weeks when compared to other major altcoins.
FTSE100 up for 4th day in a row, hits 2-week high
We’ve seen another positive day for European markets with the FTSE100 pushing up to its highest levels in 2 weeks, although it remains well short of reversing its March losses, unlike the DAX which has reversed nearly all its post 9th March decline.