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AUD/USD climbs to one-month tops, around 0.7785 amid broad-based USD weakness

  • AUD/USD attracted some dip-buying near the 0.7700 mark and shot to one-month tops on Monday.
  • Reduced Fed rate hike bets, sliding US bond yields undermined the USD and remained supportive.
  • Technical buying above the 0.7750-60 region further contributed to the strong intraday move up.

The AUD/USD pair built on its strong intraday positive move and shot to one-month tops, around the 0.7785 region during the first half of the European session.

Following the previous session's downtick and an early dip to the 0.7700 neighbourhood, the pair regained positive traction on Monday and was supported by a broad-based US dollar selling. Investors continue scaling back their expectations for an earlier than anticipated Fed lift-off, despite the incoming positive US economic data. This was seen as one of the key factors that have been undermining the greenback over the past one week or so.

Growing market confidence that the Fed will keep interest rates near zero levels for a longer period was evident from the recent decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond sank to 1.5280% last week, down around 25 basis points from a 14-month peak of 1.776% touched in March. This was seen as another factor that further contributed to drive flows away from the greenback.

Meanwhile, a slight deterioration in the global risk sentiment failed to lend any support or provide any respite to the safe-haven greenback. Investors turned caution amid renewed fears about another dangerous wave of coronavirus infections globally. The risk-off mood, however, did little to dent demand for the perceived risker Australian dollar or stall the AUD/USD pair strong intraday positive move to the highest level March 18.

Apart from the broad-based USD weakness, the uptick could further be attributed to some technical buying on a sustained move beyond the 0.7750-60 region. Hence, it remains to be seen if the strong move up is backed by genuine buying or turns out to be a stop-run amid absent relevant market moving economic releases from the US.

Technical levels to watch

 

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