The Australian Dollar (AUD) is gaining traction as the US Dollar loses traders' interest at the start of the week. On Monday, the AUD/USD pair jumped by 1% to 0.6255, extending its recovery from previous setbacks. This surge was primarily driven by a marked sell-off in the US Dollar, which revisited levels beneath 108.00, reflecting a pronounced bout of risk-on sentiment in the markets.
The Relative Strength Index (RSI) for the AUD/USD stands in the upper 50s near 59, having climbed sharply and reinforcing a positive tone for the currency pair. Concurrently, the Moving Average Convergence Divergence (MACD) histogram continues printing green bars, hinting at building bullish momentum. These technical indicators suggest that the Aussie may maintain its upward trajectory.
The US Dollar's decline on Monday provided a significant opportunity for the AUD/USD to gain notable momentum, allowing it to reach multi-day peaks just below the 0.6300 threshold. This movement in the forex market reflects traders' shift towards riskier assets, spurred by recent developments in global economic policies.
The GBP/USD also experienced a rise of 1.35% on Monday, climbing back over the 1.2300 handle. This increase was partly due to markets reacting positively to US President Donald Trump's last-minute pivot away from implementing broad trade tariffs—a decision that fostered a collective sense of relief among investors.
Amidst these changes, safe-haven currencies like the Swiss Franc, US Dollar, and Japanese Yen faced different dynamics. The Swiss Franc remains a favored choice due to strict Swiss banking laws that offer enhanced capital protection. Meanwhile, the US Dollar, known for its status as the world's reserve currency and perceived safety, saw a dip as risk-on sentiment prevailed. The Japanese Yen continued to attract demand due to its stable government bonds held predominantly by domestic investors.
Currencies such as the Australian Dollar (AUD), Canadian Dollar (CAD), New Zealand Dollar (NZD), and others like the Ruble (RUB) and South African Rand (ZAR) typically rise in "risk-on" markets. This was evident as investors turned their focus towards these currencies in light of easing concerns regarding US trade policies.
Despite the current momentum, potential challenges lie ahead for the Australian Dollar. The Reserve Bank of Australia's (RBA) policy path and mixed domestic fundamentals may temper any further upside in the currency. However, the AUD/USD pair may consolidate above the mid-0.6200s and set its sights on the psychological 0.6300 barrier.
Market speculation concerning a Federal Reserve rate cut by mid-year also adds complexity to the forex landscape. According to the CME FedWatch Tool, there is a 55% chance of holding rates in May before a possible move by June. These expectations contribute to the broader risk-on sentiment that has been influencing currency dynamics.