AUD/USD may rise further as APAC markets look to ride bullish momentum

Wednesday’s Asia-Pacific outlook

Asia-Pacific markets look set for another positive day of trading after US stocks pushed higher, and AUD/USD set a fresh 2022 high. Treasury yields advanced for a second day as rate traders moved to price in a growingly hawkish shift in Federal Reserve rate hike bets. Markets are now anticipating a 50 basis point hike at the FOMC’s May meeting. Federal Reserve Governor Loretta Mester was the latest official to signal a more aggressive monetary policy outlook. The 2s10s Treasury curve rose back above 22 basis points overnight, which may have helped ease recession fears.

Hong Kong’s Hang Seng Index (HSI) jumped over 3% on Tuesday, although the index remains nearly 5% below its monthly high. The positive performance comes despite China’s hesitancy to provide more monetary support this week by holding loan prime rates steady. However, analysts still expect to see several easing moves from the People’s Bank of China in the coming months.

Australia’s ten-year government bond yield fell overnight but not before hitting the highest level since June 2018. The Australian dollar is likely to continue benefiting from rising yields, as it could push the Reserve Bank of Australia (RBA) to firm up its outlook. That would benefit the Australian dollar, adding to the currency’s tailwinds, which include rising commodity prices and the risk-on market shift.

New Zealand’s Prime Minister Jacinda Ardern said this morning that the Omicron outbreak in Auckland has peaked. Ms. Ardern also announced the rollback of several Covid restrictions, including outdoor gathering limits. NZD/USD rose over 1% to its highest level since November 23, 2021. Today’s economic calendar is light, but Thailand’s trade balance (Feb) and Japan’s coincident index are scheduled to cross the wires. Meanwhile, the situation in Ukraine remains tense with no end in sight. President Biden will visit Poland on Friday as the US reportedly readies a new round of Russian sanctions.

AUD/USD technical forecast

AUD/USD is pushing into fresh 2022 highs this morning. The 0.7500 level may provide some resistance, but prices may climb to test the October 2021 high at 0.7556 if the current momentum holds. The MACD oscillator is strengthening and the 20-day Simple Moving Average (SMA) crossed above its 200-day SMA earlier this week, both bullish signs. Alternatively, a pullback to the 78.6% Fibonacci retracement level may be on the cards if bulls let off the gas.

AUD/USD daily chart

Follow Thomas Westwater on Twitter @FxWestwater

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. This information Advice given in this article is general in nature and is not intended to influence any person’s decisions about investing or financial products.

The material on this page does not contain a record of IG’s trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.