AUD/USD could rise further as APAC markets look to track bullish momentum

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Australian Dollar, AUD/USD, Market Sentiment, Returns – Talking Points

  • The Australian dollar appreciated overnight against the US dollar as risky flows increased
  • Asian stocks could extend their rally after US stocks rise alongside Treasury yields
  • AUD/USD looks set to test October 2021 high after bullish SMA crossover

Wednesday’s Asia-Pacific Outlook

Asia-Pacific markets look set for another positive trading day after US equities rose and AUD/USD hit a new high in 2022. Treasury yields rose for a second day as Rates traders turned to prices in an increasingly hawkish shift in bets on the Federal Reserve’s rate hike. Markets are now pricing in a 50 basis point hike at the FOMC meeting in May. Federal Reserve Governor Loretta Mester was the latest official to signal a more aggressive monetary policy outlook. The 2010s Treasury curve climbed back above 22 basis points overnight, which may have helped ease recession fears.

Hong Kong’s Hang Seng Index (HSI) jumped more than 3% on Tuesday, although the index remains nearly 5% below its monthly high. This positive performance comes despite China’s reluctance to provide more monetary support this week by keeping prime lending rates stable. However, analysts still expect to see several easing measures from the People’s Bank of China in the coming months.

The yield on Australian 10-year government bonds fell overnight, but not before hitting its highest level since June 2018. The Aussie dollar should continue to benefit from rising yields as it could push the Reserve Bank of Australia (RBA) to firm up its outlook. This would benefit the Australian dollar, adding to the currency’s tailwinds, which include rising commodity prices and shifting risk markets.

New Zealand Prime Minister Jacinda Ardern said this morning that the Omicron outbreak in Auckland had reached its peak. Ms Ardern also announced the rollback of several Covid restrictions, including outdoor gathering limits. NZD/USD rose more than 1% to its highest level since November 23, 2021. Today’s economic calendar is light, but Thailand’s trade balance (February) and the index coincide from Japan should intersect. Meanwhile, the situation in Ukraine remains tense with no end in sight. President Biden will visit Poland on Friday as the United States reportedly prepares another round of Russian sanctions.

AUD/USD Technical Forecast

AUD/USD hits fresh 2022 highs this morning. The 0.7500 level may offer some resistance, but prices may rise to test the October 2021 high at 0.7556 if current momentum holds. The MACD oscillator is strengthening and the 20-day simple moving average (SMA) passed its 200-day SMA earlier this week, two bullish signs. Alternatively, a pullback towards the 78.6% Fibonacci retracement level can be seen if the bulls release the gas.

AUD/USD daily chart

Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter

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