Aussie Pair in a Tight Strait
The AUD/USD currency pair continued to be limited to a narrow route as it headed towards the Europe session on the first day of a new week. It was, however, able to consolidate its set of latest gains to the year-to-date highest level. At the time of putting the report together, the pair was observed to be in neutral territory in the vicinity of the 0.7515 zones.
AUD/USD price chart. Source TradingView
Various factors, albeit different in their nature, did not succeed in giving any favorable push to the AUD/USD currency pair and it eventually led to a price action that was range-bound as the market opened for business in the new week.
The latest set of blowout rallies in the price of commodities has continued to give some form of support to the Australian dollar which is pegged to various resources, although a steady US dollar purchase put a firm lid on further significant gains.
Reality Creates More Support for the US Dollar
The US dollar got a lot of support from the increasing acceptance of people that the Federal Reserve is going to adopt a monetary policy that would be more aggressive in response to the escalating inflation rates. As a matter of fact, the entire market has been continuously pricing in a 50 basis points interest rate increase in the Federal Reserve’s coming policy meeting in May. If this happens, it would push bond yields on the benchmarked ten-year American bond to a totally new two-year high point and it will underpin the pair in many ways.
Aside from the foregoing, the cautious mood that sweeps the financial market is a further benefit to the US dollar and its safe-haven status. As there is no form of progress in the peace talks between Russia and Ukraine, the exercise of new lockdown measures as a result of spreading Covid in China, also weighs heavily on the sentiment of investors. These conditions have obstructed bullish traders from staking aggressive wagers and it also caps the AUD/USD currency pair.
For now, there are no upcoming major events or data that will be of strong impact on the market as there are no reports due to be published. This leaves the US dollar in the hands of the bond yields and its entire dynamics. Aside from this, traders are expected to take a lead from the wider market’s risk sentiments going around.