Risk appetite has returned decisively, pushing DOW to fresh record highs overnight and drawing Asian markets higher in its wake. The improved tone has spilled into FX, with Australian Dollar emerging as the strongest performer amid renewed risk-on sentiment.
The US deposition of Venezuelan President Nicolás Maduro initially injected caution into markets. However, investor hesitation proved short-lived as participants reassessed the broader implications and found little reason to sustain defensive positioning.
A growing consensus has emerged that events in Venezuela are unlikely to disrupt global or Latin American financial markets. Crucially, investors see limited risk of spillovers into energy markets, removing a key channel through which geopolitical shocks typically feed into broader macro pricing.
Oil’s muted reaction has been central to the shift back toward risk. With crude prices steady, markets are increasingly confident that the Venezuela developments will not materially affect US inflation dynamics, keeping the Fed’s easing path intact. That backdrop supports expectations for at least one further rate cut this year.
Technically, AUD/USD has resumed its uptrend after firm break above the 38.2% retracement of 0.8006 to 0.5913 at 0.6713. The move strengthens the case that the rebound from 0.5913 is evolving into a broader trend reversal of the decline from the 2021 high at 0.8006. The next near-term target is seen at 61.8% projection of 0.5913 to 0.6706 from 0.6420 at 0.6910.
