AUD/USD inter-markets: Still scope for further upside?

The AUD/USD pair extends its four-day winning streak on Thursday, although failed to take-out four-month tops at 0.7757 and now consolidates above 0.77 handle over the last few trading hours.

The Aussie moved-off multi-month highs and reversed a small part of yesterday’s heavy gains, mainly on the back of AUD/NZD cross-driven weakness, after the NZD surged nearly 250 pips versus the US dollar, as the RBNZ’s 25bps rate cut decision failed to excite investors. Markets had predicted 50bps rate cut to 1.75%.

However, the retreat in the major appears capped by upside consolidation in the copper, which helps keep the rate above 0.77 barrier. Copper posted the biggest rally in almost two weeks a day before, after the greenback weakened on scepticism surrounding Fed rate hike prospects for this year, boosting demand for commodities as an alternative investment.

Moreover, a recovery staged by the oil prices also continues to underpin the sentiment around the resource-linked AUD. Further, the Aussie also benefits from the persisting risk-on market profile fuelled by positive European equities, with the VIX (CBOE Volatility Index) tumbling -1.50% at the time of writing.

However, more or less stable 10-year Australian and US treasury yield spread offers little incentives on the AUD/USD price-action. Looking ahead, focus now turns towards the economic fundamentals due Friday, which will have significant impact on the Aussie pair. A string of Chinese macro data will be published in the Asian morning tomorrow ahead of the US dataflow, which will wrap up a data-light economic calendar this week.