AUD/USD climbed above the 0.7200 level to trade at its highest since early May, buoyed by strengthening yen, robust risk appetite and pricing in a more hawkish Reserve Bank of Australia.
The Aussie’s move higher has been amplified by the yen’s continued rally, which has pushed USD/JPY lower following the record intervention period seen in late July and early August, along with potential intervention at the start of this month. The yen reached its strongest level against the US dollar since February.
According to the analysis published by Investing.com, AUD/USD has shown an asymmetric reaction to shifts in US yields and risk appetite. When US yields rose and risk sentiment deteriorated, pullbacks in the pair were shallow. Conversely, when yields eased and risk appetite improved, the upside response was notably larger. The five-day inverse correlation with US yields has strengthened to -0.94, while the correlation with the 10-year yield sits at -0.97.
The analysis also noted consistent positive correlations between the Aussie and global risk sentiment across multiple timeframes — +0.88 over five days, +0.54 over 20 days and +0.60 over 60 days — as well as similarly strong relationships with select Asian currencies.
Headline-driven selling in USD/JPY on Monday coincided with the AUD/USD break through 0.7200. While headlines cited potential GPIF repatriation flows, carry-trade unwinds and continued hawkish BOJ repricing — now pricing more than three rate hikes by mid-next year, including a strong possibility of two this year — none of those factors were considered new developments, having been known for weeks.
Domestic catalysts may provide the next trigger. Market pricing now reflects approximately a two-in-three chance of an RBA rate hike later this month. Comments from RBA Chief Economist Sarah Hunter and Deputy Governor Andrew Hauser later in the session could spark near-term volatility if they signal support for or push back against that pricing.
US consumer price index data on Thursday and producer price index data on Friday will serve as the broader market test. The analysis identifies the CPI print in particular as the likely determinant of whether the AUD/USD advance consolidates into a sustained breakout or reverses sharply.
On the technical side, AUD/USD trades above key medium- and long-term moving averages, all sloping positively. The RSI(14) suggests upside momentum is rebuilding, while the MACD remains above its signal line in positive territory. Potential targets lie at the year-to-date high of 0.7276 and the June 2022 high of 0.7283. A move beyond 0.7283 would face little resistance until 0.7418, the 23.6% Fibonacci retracement of the pandemic-era low-to-high range.
If the pair falls back below 0.7200, support is found near 0.7150 along an uptrend line from the late-July low, followed by 0.7130 and 0.7080, where the 100-day moving average sits.
