AUDUSD drops to fresh fortnight low on RBA’s dovish halt

Market sentiment remains downbeat early Tuesday as hawkish concerns about the US Federal Reserve (Fed) joining the Bank of Japan’s (BoJ) rate hike and geopolitical woes surrounding China, Russia and the Middle East.

US Dollar Index (DXY) jumps to the highest level in two weeks during a four-day uptrend while Gold price struggles to defend the previous day’s corrective bounce off the $2,149-48 support confluence. Further, Crude Oil remains dicey at the highest level since early November 2023 whereas EURUSD and GBPUSD stay pressured at the weekly bottom amid broad US Dollar strength and lack of positives from the respective economies.

Above all, USDJPY jumps the most among the G10 currency pairs despite the Bank of Japan (BoJ) action while AUDUSD drops to a two-week low on the Reserve Bank of Australia’s (RBA) dovish halt, as well as due to China woes.

Elsewhere, BTCUSD and ETHUSD extend the week-start retreat toward refreshing the fortnight low as crypto buyers pare gains ahead of Wednesday’s FOMC.

Following are the latest moves of the key assets:

• Brent oil seesaws at a 4.5-month high, printing mild losses around $87.00 by the press time.
• Gold price fades the previous day’s corrective bounce while falling to $2,156 as we write.
• USD Index rises to a two-week high, near 103.80 at the latest.
• Wall Street closed with mild gains but the Asia-Pacific stocks edged lower. Further, the shares in Europe and the UK lack momentum during the initial hour.
• BTCUSD and ETHUSD extend the previous day’s fall to $64,200 and $3,340 at the latest.

US Dollar braces for hawkish Fed actions…

While the market players appear convinced of the Fed’s hawkish statements in Wednesday’s monetary policy announcements, the risk-negative headlines from China, Russia and the US add strength to the Greenback’s haven demand and challenge the commodity buyers.

China President Xi Jinping congratulates his Russian counterpart Vladimir Putin on reelection and reaffirms continued strategic ties between China and Russia. The same joined hawkish Fed concerns and the market’s cautious mood ahead of this week’s FOMC to weigh on the riskier assets and propel the US Dollar. Furthermore, fears of witnessing large layoffs in China and property market woes also challenge the commodity buyers and favor the US Dollar bulls.

Additionally, the White House came out with a statement saying, “Deal for Gaza ceasefire has been more elusive than the US hoped,” which in turn tests the risk appetite and allows the Greenback to edge higher, as well as exert downside pressure on the Gold price.

Meanwhile, reports from the US of a 'handshake' deal to avoid the government shutdown defend the optimists and put a floor under the Gold price, especially amid the wide expectations of witnessing Fed rate cuts starting in June.

With this, the DXY remains firmer and the EURUSD fails to cheer the hawkish comments from the European Central Bank (ECB) officials. That said, ECB policymaker Mario Centeno said that cutting interest rates may help prevent a recession.

USDJPY becomes the biggest mover among the G10 currency pairs even as the Bank of Japan (BoJ) announces its first interest rate hike in 17 years while exiting the Negative Interest Rate Policy (NIRP). The BoJ also ended the Yield Curve Control (YCC) policy by matching the market forecasts.

Further, the AUDUSD slumps to a two-week low on the Reserve Bank of Australia’s (RBA) dovish halt. Following that, the RBA Governor Michelle Bullock also defended the policy decision while advocating rate cuts amid slowing inflation.

NZDUSD drops to a five-week low as the New Zealand (NZ) Treasury confirms economic hardships for the Pacific nation the last week, per the updates released Monday. That said, NZ Prime Minister Christopher Luxon’s comments suggesting deterioration in economic conditions also exert downside pressure on the Kiwi pair.

• Strong buy: USDCAD, USDJPY
• Strong sell: Crude Oil, US Dollar, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

US housing market data to entertain traders ahead of FOMC…

While the hawkish Fed concerns and the risk-off mood could keep the US Dollar firmer, the pre-Fed consolidation might challenge the Greenback buyers. Even so, the US Housing Starts and Building Permits will entertain the momentum traders. That said, the traders’ discomfort with the US central bank’s hawkish stand will be the key catalyst to watch and can shape the near-term US Dollar moves moving on.

May the trading luck be with you!