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  • AUD/USD extends Monday’s recovery moves, takes the bids of late.
  • Market sentiment welcomes downbeat Chicago Fed activity data, familiar Fedspeak.
  • Firmer equities, commodities favor bulls inside recent trading range.
  • Light calendar highlights inflation, Fed and yields as the key catalysts.

AUD/USD seesaws around 0.7750, after an upbeat start to the week, during the early Tuesday morning in Asia. The risk-barometer pair cheered welcome performance of commodities, especially gold, as well as equities to stay within a known trading range between 0.7700 and 0.7820. However, a lack of major catalysts in Asia probes the latest up-moves.

Market sentiment is crucial”¦

A lack of major data/events offered a dull Monday morning to AUD/USD traders before the bulls stepped in amid the broad US dollar weakness and a run-up in equities and commodities. Behind the moves were downbeat US data and Fed comments suggesting that the jump in inflation is temporary.

US Chicago Fed National Activity Index came in weaker than prior 1.71 to 0.24. The data helped Fed Governor Lael Brainard to reject reflation fears being a threat to the Fed while saying, “the Fed has the tools to deal with inflation  if it moves persistently above target.” On the same line was St. Louis Fed President James Bullard anticipated more inflation but added that it would mostly be temporary.

In addition to the downbeat data and Fedspeak in favor of the easy money lovers, optimism over the cure to coronavirus (COVID-19) Indian strain and mass vaccinations in Japan, as well as steady inoculation in the West, keeps bulls hopeful.

It should, however, be noted that the US-China tussles and Canberra-Beijing tensions regain the attention of late, which in turn tame the AUD/USD buyers.

Amid these plays, Wall Street benchmarks posted a positive day while the US 10-year Treasury yields weighed on the US dollar index (DXY) with 2.9 basis points (bps) of downside.

Given the fewer known indicators on hand to watch, AUD/USD traders should keep their eyes on the market mood while taking clues from the inflation headlines, US Treasury yields and Fed comments for short-term direction.

Technical analysis

Failures to break neither 50-day SMA nor a monthly support line, respectively around 0.7730 and 0.7715, redirect AUD/USD buyers toward the 0.7800 round-figure. However, multiple tops marked since January guards the upside moves near 0.7820.