AUD/USD: Risk-on, US dollar weakness back the bulls eyeing 0.8000

FX
  • AUD/USD bulls catch a breather near the highest since February 2018.
  • Statements from China, likely US-Iran tussle and Fitch’s negative outlook on Aussie credit rating failed to supersede virus/vaccine, stimulus optimism.
  • Light calendar emphasizes risk catalysts for fresh direction.

AUD/USD wavers around 0.7920, stepping back from a fresh three-year high a few minutes back, during the early Tuesday morning in Asia. The aussie pair rose for the third consecutive day on Monday while refreshing the multi-month high as global markets cheered US dollar weakness amid the risk-on mood and the jump in the Treasury yields. However, cautious sentiment ahead of this week’s key data/events probes the bulls off-late.

Market optimism propels bonds, commodities and Antipodeans also benefit…

The coronavirus (COVID-19) vaccinations are mostly going smooth and helping the recovery curve in the economies like the UK and Israel to announce unlock measures from the virus-led activity restrictions. The mood, however, took its turn more towards the recently favored bonds amid hopes of further US stimulus, which in turn dragged the US dollar index (DXY) to the six-week low.

On Monday, the global rating giant downgraded Australia’s credit outlook to negative while keeping its ‘AAA’ rating intact. The news joins the latest US-Iran tussle over the detention of American citizens by Tehran as well as over the 2015 nuclear deal. Further challenging the mood could be China’s mixed comments suggesting the readiness for a fresh start with the US while also warning to not meddle in the internal issues.

While Nasdaq had to bear the burden of a jump in the US Treasury yields to a one-year high, other Wall Street benchmarks ended Monday’s trading on the mixed footing. The risk-on mood could also be witnessed in the recovery of gold prices and overall strength in the Antipodeans like dollars of Australia and New Zealand (NZ).

Looking forward, a lack of major data/events can keep AUD/USD at a mercy of the risk catalysts and the US dollar moves, which in turn relies on the Treasury yields off-late. However, bulls may remain cautious before Today’s semi-annual testimony by Fed Chair Jerome Powell and Wednesday’s Australian Wage Price Index.

Technical analysis

Unless breaking below 0.7820-15 area comprising highs marked on April 2018 and January 2020, AUD/USD sellers are less likely to step-in. Meanwhile, February 2018 peak surrounding 0.7975-80 can offer an intermediate halt on the way to 0.8000 psychological magnet.

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