The Australian Dollar (AUD) strengthened against both the Japanese Yen (JPY) and the US Dollar (USD) during early Monday trading, supported by improved risk appetite and technical factors. The AUD/JPY cross rose to around 113.80, buoyed by hopes of a deal to reopen the Strait of Hormuz, as the United States and Iran signaled progress in negotiations, though key details remain unresolved and a US official indicated it could take a few more days to finalize an agreement. US President Donald Trump stated that a deal is close, but emphasized that the US blockade on Iranian ships would remain until an agreement is signed [1].
Despite the positive risk sentiment, the Australian Dollar's upside may be capped by domestic economic data. The unemployment rate in Australia increased to 4.5% in April from 4.3% in March, marking the highest level in about four and a half years. As a result, market expectations for a rate hike at the Reserve Bank of Australia's next meeting dropped sharply to 3%, down from 13% prior to the employment report, according to Westpac's financial market pricing [1].
Technical analysis for AUD/JPY indicates a constructive bullish bias, with the pair holding above the Bollinger middle band and the 100-day moving average. The Relative Strength Index (RSI) is near 54, suggesting steady but moderate upside momentum. Immediate resistance is at 114.72, with support at 113.65 and deeper support at 112.53 and 110.80 [1].
Meanwhile, AUD/USD advanced to around 0.7160 after two days of losses, maintaining a modest bullish bias above the 50-period and nine-period EMAs. The 14-day RSI near 51 points to neutral-to-slightly positive momentum. The pair is testing the nine-day EMA barrier at 0.7161, with potential to approach the upper boundary of the rectangle at 0.7270 and 0.7277, the highest since June 2022, if momentum improves. Key support levels are at 0.7116 and 0.7070, with further declines potentially targeting the four-month low of 0.6833 recorded on March 30 [2].
Currency performance data shows the Australian Dollar was the strongest against the US Dollar, with a 0.46% gain, and also posted gains against other major currencies [2].
CONCLUSION
The Australian Dollar showed resilience and gained against major currencies, supported by improved risk sentiment and technical factors. However, the upside may be limited by weaker domestic employment data and reduced expectations for further RBA rate hikes. Market participants are watching for further developments in the Strait of Hormuz negotiations and upcoming RBA policy decisions.