AUD/USD Analysis: Acceptance above 0.7315-20 hurdle favours bullish traders

The AUD/USD pair caught some fresh bids on the first day of a new week and shot to four-week tops, around the 0.7370-75 region, albeit lacked follow-through. In the absence of any fresh fundamental catalyst, the widespread rally in commodity prices turned out to be a key factor that extended some support to the resource-linked Australian dollar. That said, the emergence of fresh buying around the US dollar kept a lid on any further gains for the major, at least for the time being. The USD continued drawing some support from prospects for an early policy tightening by the Fed and got an additional boost from the risk-off impulse in the markets.

Despite Friday's disappointing headline NFP print, investors seem convinced that the Fed remains on track to begin tapering its bond purchases as soon as November. The market might have also started pricing in the possibility of an interest rate hike in 2022 amid worries that the recent surge in crude oil/energy prices will stoke inflation. The expectations were reinforced by elevated US Treasury bond yields, which, in turn, acted as a tailwind for the greenback. It is worth recalling that the yield on the benchmark 10-year US government bond shot to 1.612%, or four-month tops on Friday and helped limit the US jobs data-inspired USD selling.

Meanwhile, fears about a faster than expected rise in inflation and a slowdown in the global economic recovery have been fueling concerns about stagflation. Apart from this, China Evergrande contagion risks triggered a corrective pullback in the equity markets. This further benefitted the safe-haven greenback and acted as a headwind for the perceived riskier aussie. Nevertheless, the pair ended the day in the green and held steady near mid-0.7300s through the early part of the trading action on Tuesday. Australian business confidence jumped sharply in September, which along with a modest USD weakness, extended some support to the pair.

Market participants now look forward to the release of August JOLTS Job Openings data from the US for some impetus later during the early North American session. The focus, however, will remain on Wednesday's release of the latest US consumer inflation figures and the FOMC monetary policy meeting minutes. Investors will further take cues from the US monthly Retail Sales figures due on Friday, which will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the major.

Technical outlook

From a technical perspective, last week’s sustained breakthrough the 0.7310-15 strong horizontal resistance was seen as a fresh trigger for bullish traders. This, in turn, might have already set the stage for additional gains, back towards reclaiming the 0.7400 round-figure mark. Some follow-through buying has the potential to lift the pair back towards September monthly swing highs, around the 0.7475-80 region, with some intermediate resistance near the 0.7440 zone.

On the flip side, the 0.7315-10 resistance breakpoint now seems to protect the immediate downside. This is closely followed by the 0.7300 mark, which if broken decisively will shift the bias back in favour of bearish traders. The pair might then accelerate the fall further towards the next relevant support near the 0.7225 region en-route the 0.7200 round figure. A subsequent decline below monthly swing lows, around the 0.7170 area, will expose the 0.7100 mark, or YTD lows touched on August 20.