- In the face of a plunge in the US dollar, the AUD/USD pair rallied on short exits.
- A risk momentum undermined the safe-haven dollar and benefited the seemingly riskier Australian dollar.
- Further upside will be limited ahead of next week’s RBA/Fed policy announcements.
The AUD/USD price saw a solid intraday rebound in the first half of the European session, climbing to a fresh daily high above 0.7160 in the last hour.
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On the last day of the week, the pair recovered from the lows it reached earlier in the month, around 0.7000 the previous day. The US dollar broke out of a six-day winning streak during extended trading and hit a five-year high. As a result, the perceived riskier Aussie gained support, causing some short covering in AUDUSD.
In addition, the expectation of an imminent rate hike by the Reserve Bank of Australia provided additional support to the resource-pegged Australian dollar. The Australian Bureau of Statistics reported on Wednesday that consumer prices rose at their fastest rate in two decades in the first quarter. The data fueled speculation that the RBA may tighten policy next week.
However, the question remains whether the bulls will be able to capitalize on this move or whether a rapid hike in US interest rates will provide fresh supply at higher levels. At the upcoming FOMC meeting on May 3rd-4th, markets expect a 50-basis point rate hike. Furthermore, at the US Federal Reserve’s next meeting in June and July, the central bank is expected to tighten monetary policy further, eventually raising interest rates to around 3.0% by the end of the year.
What’s next to watch?
Therefore, the market will continue to focus on the risks of upcoming central bank events – the RBA policy update on Tuesday and the FOMC decision on Wednesday. Traders can, however, refrain from aggressive betting, making it wise to wait for subsequent purchases before positioning further for profits. Nevertheless, the AUD/USD pair may end the week in the red for the fifth straight week and remain vulnerable to dollar price movements.
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AUD/USD price technical analysis: Buyers looking for 0.7200
The AUD/USD price gradually rose above the 20-period SMA on the 4-hour chart. The price looks poised to post further gains as the volume for the upside wave is rising. The next key hurdle for the pair is around 0.7200 (psychological mark) and the descending trendline.
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Saqib Iqbal
