FX analysis – AUD dips ahead of RBA, USD follows yields higher on Hawkish Powell, Gold hits 1-week lows

USD was bid in Mondays session with the US Dollar Index following US treasury yields higher after hawkish comments from Fed Chair Powell over the weekend where he pushed back on market pricing of rate cuts starting in March. A beat in the ISM Services PMI data also supporting DXY as rate cut odds in March dropped down to around 17% from the 35% chance priced in at the close on Friday.

JPY continued its decline with USDJPY printing a new high for 2024 at 148.89. US 10 Year yields broke above 4%, seeing the US10Y – JP10Y rate differential jump higher and take USDJPY with it. USDJPY holding above the psychological 148 level and eyeing the 150 “intervention zone”.

AUDUSD saw significant weakness with USD strength and a miss in the Chinese Caixin Services PMI weighing. For AUD traders’ attention today will turn to the RBA rate decision at 14:30 AEDT. The Central bank is widely expected to hold rates steady, but it will be the accompanying statement that will generate the most interest, will the RBA take a note out the Feds book and push back against rate cut expectations?

Gold dipped to 1-week lows on a stronger USD and a surge in yields making the non-yielding metal look less attractive. XAUUSD dipping to a low of 1025 before finding some support and re-tracing modestly. Gold continuing to trade in the 2024 range of 2000 – 2070 USD an ounce. Both key levels to watch for Gold traders going forward.