- Aussie pair surges 1% to 0.6255 on Monday.
- Trump administration unveils a measured approach to tariffs.
- Softer USD underpins global equities, bolstering risk appetite.
The marked sell-off in the US Dollar on Monday paved the way for the AUD/USD to gain notable momentum, allowing it to reach multi-day peaks just below the 0.6300 threshold at the start of the week. The movement was part and parcel of markets digesting Donald Trump’s inauguration speech signals. This sharp rally came despite lingering questions over the Reserve Bank of Australia’s (RBA) policy path and mixed domestic fundamentals, highlighting the influence of a broadly weaker Greenback on high-beta currencies like the Aussie.
Daily digest market movers: Aussie recovers mainly due to a softer USD
- The Aussie is gaining traction as the US Dollar loses traders’ interest at the start of the week. The US Dollar Index revisited levels beneath 108.00 on Monday, reflecting a pronounced bout of risk-on sentiment.
- Following his inauguration, President Donald Trump directed federal agencies to examine persistent trade imbalances and consider corrective actions — particularly toward nations like China, Canada and Mexico, although a taskforce will first evaluate potential tariffs.
- Global stocks hold firm, buoyed by hopes that the new administration’s initially measured stance on trade may avert major upheavals.
- Market speculation concerning a Fed rate cut by mid-year grows with the CME FedWatch Tool assigning a 55% chance to a hold in May before a possible move by June.
- On the local front, the Aussie may suffer from a mixed economic outlook, or if the RBA eventually gives hints that it will start cutting rates in Q1 of 2025.
AUD/USD technical outlook: Bulls eye higher ground amid choppy swings
The AUD/USD pair jumped by 1% to 0.6255 on Monday, extending its recovery from previous setbacks. The Moving Average Convergence Divergence (MACD) histogram continues printing green bars, hinting at building bullish momentum.
Meanwhile, the Relative Strength Index (RSI) stands in the upper 50s near 59, having climbed sharply and reinforcing a positive tone. If the pair can consolidate above the mid-0.6200s, it could set its sights on the psychological 0.6300 barrier, although persistent policy and growth concerns may still temper any further upside.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Editors’ Picks
Gold remains focused on all-time highs
Gold stays in positive territory above $2,700 on Monday as the improving risk mood makes it difficult for the US Dollar to find demand. Markets await US President Donald Trump’s speech at the inauguration ceremony.
GBP/USD gains ground ahead of UK labor figures
GBP/USD rose 1.35% on Monday, gaining ground and climbing back over the 1.2300 handle as markets breathe a collective sigh of relief after freshly-minted US President Donald Trump made a last-minute pivot away from a broad, sweeping policy of day-one trade tariffs.
Trusted Broker Reviews for Smarter Trading
VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.