The AUD/USD pair continues its upward trajectory for the second consecutive day, approaching the 0.6600 level in early European trading on Thursday. Bullish momentum seeks to extend beyond the crucial 200-day Simple Moving Average (SMA), supported by the recent recovery from the 0.6480-0.6475 region, marking a multi-week low reached on Tuesday. The resurgence comes amid subdued demand for the US Dollar (USD).
The USD Index (DXY), measuring the Greenback against a basket of currencies, hovers near its lowest point since early February. This is attributed to uncertainty surrounding the Federal Reserve’s (Fed) approach to interest rate cuts. Fed Chair Jerome Powell, in his semi-annual congressional testimony on Wednesday, indicated a willingness to cut rates this year if evidence surfaces that inflation is falling below the 2% target. However, Minneapolis Fed President Neel Kashkari tempered expectations for a more aggressive policy easing, hinting at a potential reduction in the number of cuts in 2024, down to only one, based on strengthening macro data.
The conflicting signals contribute to a mixed outlook, limiting the downside for US Treasury bond yields. Additionally, a generally weaker tone in equity markets could act as a supporting factor for the safe-haven Greenback. Yet, China’s robust export and import growth in January-February partly counterbalances these factors, bolstering prospects for further near-term appreciation in the AUD/USD pair.
Traders are closely monitoring Fed Chair Powell’s second day of testimony, along with key indicators such as the US Weekly Initial Jobless Claims and Trade Balance data. Despite these, the market’s primary focus remains on the US Non-Farm Payrolls (NFP) report scheduled for release on Friday.
