- AUD/USD gained strong positive traction for the third successive day on Tuesday.
- Hawkish RBA meeting minutes boosted the aussie amid broad-based USD weakness.
- Traders now eye the US Retail Sales data for fresh impetus ahead of Fed Chair Powell.
The AUD/USD pair maintained its bid tone through the early European session and was last seen trading near a multi-day high, comfortably above the 0.7000 psychological mark.
A combination of supporting factors assisted the AUD/USD pair to build on its recent bounce from a near two-year low and gain traction for the third successive day on Tuesday. Hawkish Reserve Bank of Australia (RBA) monetary policy meeting minutes turned out to be a key factor that boosted the domestic currency. Apart from this, the ongoing US dollar retracement slide from a two-decade high offered additional support to spot prices.
Australia’s central bank signalled that a bigger interest rate hike is still possible in June amid the upside risks to inflation. It is worth recalling that Australia's first-quarter inflation rose at its fastest pace in more than 20 years. Conversely, a goodish recovery in the equity markets prompted some follow-through profit-taking around the safe-haven greenback and further benefitted the perceived riskier Australian dollar.
The strong intraday move up took along some short-term trading stops placed near the 0.7000 mark. Sustained strength and acceptance above the said handle might have already set the stage for additional gains. That said, a pickup in the US Treasury bond yields should help limit the USD downside ahead of Fed Chair Jerome Powell's appearance later today. This, in turn, warrants some caution before placing fresh bullish bets around the AUD/USD pair.
The markets seem convinced that the Fed would need to take more drastic action to bring inflation under control and have fully priced in at least a 50 bps rate hike at the next two policy meetings. Hence, Powell's remarks would be closely scrutinized for clues about the possibility of a jumbo 75 bps increase in June. This will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the AUD/USD pair.
In the meantime, traders will take cues from the US economic docket, featuring the release of monthly Retail Sales figures. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. Apart from this, the broader market risk sentiment should allow traders to grab short-term opportunities.
Technical levels to watch
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