The U.S. Dollar Index advanced on Monday, defying the typical inverse relationship with long-end Treasury yields and weaker energy prices, and pressured the Australian dollar after it had earlier reached multi-month highs.
The dollar’s resilience came despite a drop in 10-year Treasury yields, which were weighed by reports that the U.S. Treasury could tap the Treasury General Account (TGA) to fund expanded buybacks of long-dated securities. The TGA holds roughly $950 billion, though only a portion could be deployed for such purchases. Analysts noted the move may temporarily ease long-end yields but does not address underlying drivers such as persistent energy strength, large budget deficits and rising debt levels.
U.S. Treasury Secretary Scott Bessent outlined new sanctions on 60 individuals, entities and vessels linked to Iran but avoided immediate implementation of broader secondary sanctions targeting countries, companies or banks doing business with Tehran. The threat of exclusion from the U.S. dollar-based financial system remains, particularly for major buyers of Iranian crude such as China, though no implementation date was set.
The AUD/USD pair pulled back from recent highs, trading within a narrow range between 0.7130 and 0.7180. The Australian dollar had earlier rallied in tandem with risk assets such as gold and cryptocurrencies, but Monday’s reversal left the pair in a technical no-man’s land. Oscillators including the RSI (14) and MACD remain bullish, suggesting dips toward 0.7130 could offer attractive entry points for longs targeting 0.7180 and 0.7200. A break above 0.7200 would expose the April high at 0.7283.
On the downside, a break beneath 0.7130 would shift focus to the minor uptrend support at 0.7080 and the 100-day simple moving average near 0.7074. A sustained break below this zone would challenge the near-term bullish bias.
Later on Tuesday, the Reserve Bank of Australia’s August monetary policy minutes are due, following a meeting where the cash rate was held at 4.35%. While markets price only a 4% chance of a September hike, the minutes may still carry a hawkish tone given the board’s decision to maintain a tightening bias by ruling out rate cuts at the meeting.
