Political Instability and Falling Yields: How the USD's Weakness is Boosting AUD

Asian

Asian markets started the week quietly due to Easter Monday closures, but the spotlight was on the sharp weakening of the US dollar. The Australian dollar surged to a two-month high at 0.64015, supported by expectations of a rate cut from the RBA in May and USD depreciation amid tensions between the White House and the Federal Reserve. The New Zealand dollar and Japanese yen also jumped, while the 
euro reached a three-year peak.

In China, the yuan rebounded after the PBOC kept both the 1-year and 5-year loan prime rates unchanged, while boosting fiscal spending to support the economy amid escalating US–China trade tensions. Market sentiment is  currently dominated by US political risks, as President Trump continues to pressure the Fed and Chair Jerome Powell, raising concerns over the independence of the world’s most influential central bank.

Cryptocurrency

The crypto market saw significant volatility as exchange Bitget was forced to reverse a series of trades and issue refunds to users due to abnormal activity involving the lesser-known token VOXEL, tied to the game Voxie Tactics. VOXEL’s trading volume briefly surpassed that of Bitcoin, raising concerns about potential market manipulation. Bitget temporarily suspended related accounts and assured users that all other assets remain secure.

Meanwhile, Bitcoin continues its steady upward trend, trading around the $86,500 mark and eyeing a potential breakout above $88,000. After heavy losses in Q1, liquid crypto funds are now restructuring their portfolios, shifting away from weak altcoins and focusing on high-conviction tokens with strong fundamentals, moving away from a momentum-chasing strategy that previously dominated the market.

XAU/USD

Prediction: Strong uptrend – Setting a new all-time high

Gold continues its powerful upward momentum, recently hitting a new record high at $3,384. The current trend is clearly bullish, characterized by higher highs and higher lows with stable buying pressure. Price is approaching the psychological resistance zone of $3,400, which may trigger a short-term pullback, but the overall trend structure remains intact.

FUNDAMENTAL ANALYSIS

Monetary Policy and Fed Impact

The US dollar has dropped to a three-year low, making gold more attractive to foreign investors.

Internal tensions between President Trump and Fed Chair Jerome Powell have raised concerns over the Fed’s independence, fueling market uncertainty and supporting gold.

The ECB has recently cut interest rates, and expectations that the Fed will hold or even lower rates in 2025 continue to create a low-yield environment—favorable for gold.

Inflation and Market Drivers

President Trump intensifies the trade war with China, including new tariffs and investigations on imported minerals, sparking fears of stagflation and slowing global growth.

Gold has surged over 27% year-to-date, reflecting growing concerns about economic risks and long-term inflation.

Upcoming US CPI and GDP data releases at the end of the week will be crucial in shaping the Fed's next move.

Geopolitics and Market Sentiment

Escalating tensions between Russia and Ukraine, with thousands of ceasefire violations reported during Easter.

Lack of clear progress in US-China trade talks boosts safe-haven demand for gold.

Central banks in China and developing countries continue to buy gold, reflecting a long-term trend of gold reserve accumulation.

TECHNICAL ANALYSIS

Key Resistance Levels

• $3,400.000 – Major psychological resistance; a breakout could open the path toward the $3,500 zone.
• $3,385.435 – The most recent high, currently being retested and may be broken if strong momentum persists.

Key Support Levels

• $3,298.400 – Immediate support; previously the 1.618 Fibonacci extension resistance, now flipped to support.
• $3,212.249 – Next support zone, aligned with a bullish order block.
• $3,167.704 – Stronger support matching the 1.0 Fibonacci level – from the previous accumulation phase.
• $3,057.410 – EMA200, providing medium-term support.
• $2,956.565 – The low of the last major correction – serves as strong long-term support.

Technical indicators:

RSI is at 77.83 – overbought territory, suggesting the market might need a short-term pullback, though there is no clear reversal signal yet. If bearish divergence appears, a correction toward $3,298 or $3,212 may occur.

EMA 34 – 89 – 200: Price is trading above all major EMAs, indicating a very strong and sustainable uptrend. EMA 34 is currently providing dynamic short-term support.

Price Action:

•  If the price breaks and closes above $3,400, the next targets could be $3,440 – $3,500, as per IG analysts.
•  In case of a technical pullback, potential buy zones are $3,298 – $3,212.
•  Rising trading volume confirms the uptrend is supported by real buying pressure – investors should watch for any sudden volume drop as a cautionary signal.

Gold is in an extremely strong uptrend, supported by both technicals and fundamentals. While the market expects further gains, rapid price increases and an overbought RSI suggest that healthy corrections are necessary to sustain the trend. The recommended strategy is to “buy on dips” at key support levels.

BTC/USD

Prediction: Increase

Bitcoin is breaking out strongly from a prolonged accumulation zone near $85,000, confirming a short-term uptrend. The strong rebound has pushed the price to $87,562 — the highest since late March. Higher highs and higher lows, combined with a breakout of the previous downtrend line, indicate clear bullish momentum. However, the price is now entering a strong supply zone around $88,000–$88,800, where a short-term pullback may occur.

FUNDAMENTAL ANALYSIS

Monetary Policy and Weakening USD

The DXY (Dollar Index) has fallen 10% year-to-date, reflecting a weakening USD amid trade uncertainties and interest rate policies.

The weaker dollar increases the appeal of non-fiat assets, especially gold and Bitcoin.

While the US Federal Reserve has not signaled a rate cut yet, markets still expect policy easing in the second half of 2025.

Improved Market Sentiment

After falling below $75,000 in early April, Bitcoin began consolidating again in mid-April, forming higher highs.

Analysts note that BTC not only broke its downtrend but also successfully retested key support, reinforcing investor confidence in a new uptrend.

Prominent crypto voices, like "The Wolf Of All Streets," are spreading messages that Bitcoin has officially “broken out” after a long accumulation phase.

Capital Rotation from Altcoins to Bitcoin

Many liquidity funds reported losses up to 70% due to misallocated bets on altcoins in Q1 2025.

Institutional investors are now reducing risk exposure and increasing allocations to foundational assets like BTC.

Funds such as DeFiance Capital, Syncracy Capital, and M11 Funds are pursuing a “flight to quality” strategy—focusing on assets with strong cash flow, utility, and fundamental strength.

Bitcoin and Gold: Synchronized Safe-Haven Assets

Gold has set 55 new highs in the past 12 months, and Bitcoin is now moving in tandem with it. This suggests rising economic uncertainty.

When both gold and BTC rise simultaneously, investors interpret it as a "dual safe-haven" signal, reflecting preparation for macroeconomic risks.

TECHNICAL ANALYSIS

Key Resistance Levels

$88,000–$88,800: Strong supply zone seen multiple times in the past. A breakout would confirm stronger bullish momentum.

• $89,500: Next target if $88,800 is breached.
• $92,095: Higher resistance, aligned with a previous technical peak.

Key Support Levels

• $87,000 – $86,750: Nearest support zone.
• $86,000 – $85,750: Intermediate support, corresponding to the 38.2%–50% Fibonacci retracement of the recent rally.
• $84,850: Strong support, aligned with the 200 EMA (H1) and the previous accumulation range before breakout.

Technical Indicators:

RSI (4H chart): Currently at 72.54 – in overbought territory, suggesting strong momentum, but also a possible short-term pullback or sideways movement before another leg up.

Trading Volume: Volume surged during the April 21 breakout, confirming the move. If volume remains high during minor pullbacks, the odds of continued upside are very strong.

Price Action:

•  ETH is range-bound between $1,575–$1,600.
•  Break below $1,575 could trigger a drop to $1,492.
•  Break above $1,600 with confirmation could target $1,669.

Strategy:

• The breakout above $85,000–$86,000 is confirmed.
• Traders should watch for price behavior around the $88,000–$88,800 zone:
• If rejected → monitor support near $86,000 for potential re-entry.
• If broken with strong volume → upside target expands toward $89,500–$90,000.

AUD/USD

Prediction: Bullish

AUD/USD is maintaining a solid uptrend, forming higher highs and higher lows. The price has just broken out above the 0.6387 resistance level and is now approaching a strong supply zone at 0.6405 – 0.6455. The bullish trend is supported by a weakening USD and expectations of monetary easing in both the US and Australia. Traders should closely monitor price action within the supply zone to determine appropriate entry strategies.

FUNDAMENTAL ANALYSIS

Monetary Policy and Fed Influence

The USD is under heavy pressure as President Trump publicly criticizes Fed Chair Jerome Powell and is reportedly seeking to replace him—raising concerns about the Fed’s independence.

Market confidence in US monetary policy is declining, placing significant downward pressure on the dollar.

Falling US bond yields and expectations that the Fed will be forced to cut interest rates further amid political instability continue to support AUD.

Australia’s Monetary Policy and Domestic Outlook

The Reserve Bank of Australia (RBA) is expected to cut rates by 25–50 basis points in May 2025 to counter slowing growth amid global trade tensions.

Although easing policy typically weakens the AUD, the dramatic USD weakness has overshadowed this factor.

Upcoming PMI data this week will be crucial in gauging the strength of the Australian economy.

Market Sentiment and Geopolitical Factors

The USD is declining broadly as currencies like CHF, JPY, EUR, and AUD strengthen—indicating capital outflows from US assets.

Concerns over erratic US trade policies and rising market uncertainty are prompting investors to shift towards safe-haven or commodity-linked currencies like gold and the AUD.

Trading volume remains low due to Australian holiday closures, but the overall trend for AUD remains positive.

TECHNICAL ANALYSIS

Key Resistance Levels

• 0.6405 – 0.6455: A strong supply zone with prior Bearish Order Blocks. A breakout above this zone could trigger a strong continuation of the uptrend.
• 0.6455: Potential peak. A decisive break here confirms the breakout pattern and continuation of the medium-term bullish trend.

Key Support Levels

• 0.6387: Near-term support and EMA 34 level. Holding above this area is crucial for sustaining the uptrend.
• 0.6295: Nearby support aligned with the most recent swing low.
• 0.6174 – 0.6110: Deeper support levels if the trend reverses.

Technical Indicators:

RSI is currently at 65.52 – approaching overbought territory but not yet signaling divergence. Buying pressure remains strong, though a break above 70 within the supply zone warrants close attention.

Volume: Trading volume remains light due to the holiday, but previous sessions showed stable activity. A volume spike in the supply zone could signal a successful breakout.

Price Action:

• Price is testing the supply zone at 0.6405 – 0.6455.
• If the price breaks and closes above this zone with high volume → Consider a breakout buy, targeting 0.6520+.
• If rejected with bearish candlestick formation and overbought RSI → Look for a short-term sell setup targeting 0.6387 – 0.6295.

The current trend is bullish, but political instability in the US could cause market noise. A confirmed breakout above 0.6455 would establish a clearer uptrend, so traders should carefully watch price reactions in the 0.6405 – 0.6455 zone to choose optimal entry points.

 

 

 

 

 

 

 

 

 

 

 

 

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