AUD/USD surges the most in nine weeks on SVB and Fed-led risk-on mood

• AUD/USD stays on the front foot near intraday high as bulls cheer the biggest daily gains in almost two months.
• SVB-led risk-on mood joins receding hawkish Fed bets to drown US Dollar.
• Fresh fears surrounding US-China ties fail to derail risk-on mood.

AUD/USD bulls celebrate the biggest daily gains since early February around the 0.6665-70 hurdle during early Monday in Europe. The Aussie pair’s latest inaction could be linked to its struggle to overcome the five-week-old descending resistance line amid the broadly risk-on mood, as well as the US Dollar weakness.

While portraying the mood, S&P 500 Futures bounced off a 2.5-month low, up nearly 1.60% around 3,960 by the press time. It’s worth noting that the Asia-Pacific equities trade mixed as they’re yet to overcome Friday’s bond and stock market rout, as well as bear the burden of China-linked fears.

A new term for China’s President Xi Jinping keeps the Sino-American tension on the table as he said earlier on Monday that they must resolutely oppose the interference of external forces, 'split' of Taiwan. It’s worth mentioning that Wall Street saw the red on Friday while the US bond yields also dropped the most in a month amid fears emanating from the Silicon Valley Bank (SVB) fallout.

However, the US Treasury Department, Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) took joint actions to tame the risks during the weekend.  While reacting to the US regulators’ actions, US President Joe Biden said, “American people and American businesses can have confidence that their bank deposits will be there when they need them.”

The fallout of the SVB and Signature Bank flagged fragile conditions of the US banks, which in turn pushed back hopes of more rate hikes from the US Federal Reserve (Fed). With this in mind, Goldman Sachs expects to rate hike in March while the Fed Fund Futures also cut previously upbeat odds favoring a 0.50% rate lift in the Fed rate in March.

Amid these plays, US Dollar Index (DXY) drops to the lowest level in a month, down 0.80% near 103.80.

Looking ahead, Tuesday’s US Consumer Price Index (CPI) for February to direct immediate market moves. Following that, the Retail Sales and preliminary readings of the Michigan Consumer Sentiment Index for March, up for publishing on Wednesday and Friday, will be crucial for AUD/USD traders to watch. At home, Thursday’s Aussie jobs report will be observed to reconfirm recent dovish bias surrounding the Reserve Bank of Australia (RBA).

Technical analysis

A five-week-old descending resistance line, around 0.6665 by the press time, challenges the AUD/USD bulls.