AUDUSD holds gains despite weaker USD, upside appears limited

AUDUSD regains positive momentum, snapping a five-day losing streak and dropping to a three-month low.

The AUDUSD maintains its bid tone throughout the early European session. And is currently trading near the top end of the daily trading range, around 0.6665-0.6670, up nearly 0.50% on the day.

The Australian Dollar gains ground after domestic data showed. That consumer sentiment improved following the Reserve Bank of Australia’s (RBA) rate-hike pause earlier this month.

In fact, the Westpac-Melbourne Institute Consumer Sentiment index rebounded from near-record lows and increased 9.4% to 85.8 in early April. The fastest increase since late 2020. Furthermore, the National Australia Bank Business Confidence Index rose from -4 to -1, indicating that the economy is still holding up.

The positive domestic data, combined with some USD weakness, lend some support to the major.

A generally positive tone in the equity markets undermines the safe-haven US Dollar (USD) and benefits the risk-sensitive Australian dollar. The USD’s decline, however, is likely to be mitigated by speculation that the Federal Reserve (Fed) will continue to raise interest rates. In fact, current market pricing indicates a higher likelihood of a 25-basis point hike. At the next FOMC monetary policy meeting in May. And the bets were boosted by the mostly positive US employment data (NFP) released on Friday.

Meanwhile, the Fed’s prospects for further policy tightening provide a floor for US Treasury bond yields. Which should be maintained. further act as a tailwind for the US dollar and contribute to the AUDUSD pair’s gains being limited.

Traders may also avoid placing aggressive bets in favor of waiting for this week’s key US releases. Which include the latest consumer inflation figures and the FOMC meeting minutes on Wednesday. This, along with the US Retail Sales data on Friday, will have an impact on the USD price dynamics in the short term.

Furthermore US bond yields will drive USD demand and provide some support to the AUDUSD pair. Traders will also look for short-term opportunities based on broader risk sentiment. Nonetheless, given the fundamental backdrop. It is prudent to wait for strong follow-through buying before concluding. That the recent rejection slide from the 100-day Simple Moving Average has been reversed.

AUDUSD Daily Trends