- AUD/USD found some support near the 0.7335 region on Monday amid the prevalent risk-on mood.
- Hawkish Fed expectations continued to underpin the USD and kept a lid on any further move up.
- Investors now look forward to this week’s important macro releases for a fresh directional impetus.
The AUD/USD pair managed to recover around 22 pips from one-and-half-week lows touched earlier this Monday and was last seen trading near daily tops, just above mid-0.7300s.
Despite worries about the fast-spreading Delta variant and a global economic slowdown, the prevalent risk-on environment extended some support to the perceived riskier Australian dollar. This, in turn, was seen as a key factor that assisted the AUD/USD pair to find some support near the 0.7335 region on the first day of a new week. That said, a strong pickup in the US dollar demand might hold bulls from placing aggressive bets and keep a lid on any further gains for the major.
In fact, the key USD Index shot to two-week tops during the first half of the trading action on Monday amid expectations for an imminent Fed taper announcement later this year. The market speculations were further fueled by Philadelphia Fed President Patrick Harker's comments on Monday, who joined a chorus of policymakers keen to trim $120 billion in monthly bond purchases. This, along with the recent spike in the US Treasury bond yields, acted as a tailwind for the greenback.
The yield on the benchmark 10-year US government bond climbed back closer to the 1.35% threshold on Friday following the release of the US Producer Price Index (PPI). The PPI recorded the largest gain since November 2010 and indicated that higher inflation could persist for some time. Hence, the focus now shifts to the latest US consumer inflation figures, due for release on Tuesday.
Apart from this, traders, this week, will further take cues from important Chinese macro releases, Australian employment details and the US monthly Retail Sales figures. The data will now play a key role in influencing the AUD/USD pair ahead of the crucial FOMC monetary policy meeting on September 2021. In the meantime, the USD price dynamics and the broader market risk sentiment might produce some trading opportunities amid absent relevant market-moving economic data on Monday.