AUDUSD justifies risk-barometer status on US debt limit set-up amid sluggish markets

Risk profile improves on Monday as US President Joe Biden and House Speaker Kevin McCarthy agree on a compromised deal to avoid the US default. Even so, the agreement needs to pass through the House and the Senate to be the law, which in turn appears to challenge the risk-on mood amid holidays in multiple markets including the US.

That said, the market’s cautious optimism also takes clues from improvement in China’s Industrial Profits. Though, hawkish hopes from the Federal Reserve, backed by upbeat data, check the optimists.

With this, the US Dollar retreats from a two-month high while the commodities pare recent losses and the Antipodeans also improve.

AUDUSD’s risk-barometer status allows it to cheer the firmer sentiment, as well as justify the hopes that the RBA will also follow the RBNZ in lifting the rates.

Elsewhere, Gold bounces off recent bottoms whereas Crude Oil grinds higher but holidays in the UK, Switzerland, Eurozone and the US restrict moves of the EURUSD, GBPUSD and USDCHF.

On a different page, BTCUSD and ETHUSD bulls take a breather at three-week highs after rising the most since early April the previous day.

Following are the latest moves of the key assets:

• Brent oil prints mild gains near $77.60 after bouncing off one-week low the previous day.
• Gold price struggles to defend its latest gains at two-month low, pressured near $1,945 at the latest.
• USD Index eases from a 10-week high, making rounds to 104.20 as we write.
• Wall Street closed mixed and so did the Asia-Pacific shares. However, equities in Europe and the UK are off due to the holidays.
• BTCUSD and ETHUSD print mild losses around $27,900 and $1,900 at the latest.

Mixed mood amid quiet start to the key week

Although the much-awaited US debt ceiling deal is finally agreed upon during the weekend, holidays in multiple bourses limit reactions to the same. Also acting as the trading filter is the mixed mood among the policymakers ahead of the voting on the agreement and making it the law, that too before the June 05 deadline. Elsewhere, China data came in positive and hawks at the BoJ, as well as at the RBA, also flex muscles, which in turn prods the market sentiment despite keeping the buyers hopeful.

Amid these plays, shares grind higher but the bond market is sluggish whereas the US dollar eases and allows commodities to pare recent losses. Further, major currencies ex-AUDUSD remain mostly sluggish amid an absence of data/events and a cautious mood ahead of the key political drama, as well as the US NFP.

It should be noted that the exodus of major funds from Bitcoin and challenges for Ethereum prod the BTCUSD and ETHUSD bulls.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

Uninteresting Monday

A light calendar and lack of major data/events, as well as the Memorial Day holiday, will restrict Monday’s market moves. However, updates about the US debt ceiling and month-end positioning can join the pre-NFP consolidation to entertain intraday traders.

May the trading luck be with you!