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  • AUD/USD halts consolidation of Monday’s heavy gains, remains positive off-late.
  • US dollar index drops the heaviest in four months to revisit early March lows.
  • Risk dwindles amid light calendar, mixed updates on covid and US infrastructure spending.
  • PBOC Interest Rate Decision, RBA Minutes to decorate calendar, risk catalysts will be the key.

AUD/USD picks up bids to 0.7760, following its run-up to refresh the monthly top by 0.7785, amid the early Tuesday morning in Asia. The aussie initially benefited from the US dollar weakness and the run-up in equities before trimming the intraday gains over Wall Street’s pullback over a light calendar and thin macros off-late.

Greenback weakness is the key…

With the US dollar index (DXY) marking the heaviest losses since December 17, AUD/USD bulls ignore an absence of major catalysts to portray an uptrend. The run-up might have taken clues from the US Treasury yields, up 3.7 basis points (bps) to 1.61% by the end of Monday’s North American session. However, Wall Street’s negative closing depresses the market optimists.

While a long queue of the earnings report and the coronavirus (COVID-19) woes weigh on the risks, recently picking up vaccinations and hopes of breaking the deadlock over US President Joe Biden’s $2.25 trillion infrastructure spending plan favor the sentiment. Additionally, the opening of the Australia-New Zealand travel restrictions add to the risk-on mood but the Oz nations are cautious over the moves amid the latest virus strains and slow jabbing in Europe and Asia. It’s worth mentioning that an impressive hike in Australia’s HIA New Home Sales for March, worth around 90.3% versus 22.9% prior, also backed the AUD/USD buyers.

Against this backdrop, Wall Street benchmarks fail to keep the initial run-up towards Friday’s record tops, needless to mention the negative daily closing. Commodities also flashed mixed signals as crude oil gained but gold eased.

Looking forward, RBA minutes may unveil the Aussie central bank’s optimism after the latest upside surprises into the key economics. However, the policymakers remain divided over their employment view, amid mixed readings, which in turn can test the AUD/USD upside. Also, the People’s Bank of China (PBOC) is likely to keep one-year and five-year benchmark interest rates unchanged, respectively around 3.85% and 4.65%. However, policy guidance will be the key to follow for fresh impulse.

It should be noted that the chatters over levying fresh rules on tech shares, which are considered negative, join uncertainty concerning US President Biden’s economic relief plan and covid to tame the AUD/USD bulls.

Technical analysis

Sustained trading beyond the 50-day SMA level of 0.7720 favors the AUD/USD bulls to eye the 0.7800 threshold during the further upside. However, multiple tops around 0.7800, marked since early January, can test the buyers afterward.