Risk Appetite, US Dollar Weakness Supports Bulls Targeting 0.8000

• AUD / USD bulls take a breather near the highest level since February 2018.
• The statements from China, the likely fight between the United States and Iran, and Fitch’s negative outlook on Australia’s credit rating failed to replace the virus / vaccine stimulus optimism.
• The light calendar emphasizes risk catalysts for a new direction.

The AUD/USD It hovers around 0.7920, retreating from a new three-year high a few minutes ago, during the early days of the Asian session. The Australian pair rose for a third day in a row on Monday as it updated its multi-month high and global markets cheered the weak US dollar amid risky mood and the jump in Treasury yields. However, the cautious sentiment ahead of this week’s data / key events probes the bulls later.

Market optimism boosts bonds, commodities and antipodes also benefit …

Vaccines against the coronavirus (COVID-19) are mostly going smoothly and help the recovery curve in economies such as the UK and Israel to announce measures to unblock activity restrictions driven by the virus. However, the mood leaned more toward recently favored bonds amid hopes of further US stimulus, which in turn dragged the US dollar index (DXY) to its six-week low.

On Monday, the global rating giant downgraded Australia’s credit outlook to negative, keeping its “AAA” rating intact. The news joins the latest fight between the United States and Iran over the detention of American citizens by Tehran, as well as the 2015 nuclear deal. An additional challenge to the mood could be mixed comments from China suggesting readiness to a fresh start with the US while warning not to meddle in internal problems.

While Nasdaq had to bear the brunt of a jump in US Treasury yields to a one-year high, other Wall Street benchmarks ended trading Monday on a mixed basis. Risk appetite could also be seen in the recovery of gold prices and general strength in the Antipodes, such as the Australian and New Zealand (NZ) dollars.

Going forward, the lack of important data / events may keep AUD / USD at the mercy of risk catalysts and movements in the US dollar, which in turn is dependent on late Treasury yields. However, the bulls may remain wary of today’s semi-annual testimony from Fed Chairman Jerome Powell and Wednesday’s Australian wage price index.

Technical analysis

Unless it breaks below the 0.7820-15 area that comprises the highs set in April 2018 and January 2020, AUD / USD sellers are less likely to intervene. Meanwhile, the February 2018 high surrounding 0.7975-80 may offer an intermediate stop on the way to the 0.8000 psychological magnet.

Additional technical levels