AUD/USD breaches key 0.7170 resistance, eyes move towards 21DMA at 0.7200

AUD/USD has extended on its recent run of gains in recent trade, with the rally accelerating as the pair breached a key level of resistance around 0.7170. AUD/USD now trades close to the 0.7180 mark, up about 0.8% on the day, and extending its gains on the week to now more than 2.5%.

Recall that on Tuesday the pair broke to the north of a long-term descending trend channel that had been suppressing the price action going all the way back to early November. Well, Wednesday has seen an apparent extension of the technical buying, though the bulls are yet to push Aussie back to within reach of its 21-day moving average, which currently resides just above 0.7200.It may be a struggle for the Aussie to continue its sharp rally into the end of the week. On the four-hour candlesticks, AUD/USD’s 14-period Relative Strength Index has rapidly reversed from under 30 (oversold) as recently as last Friday to now above 70 (overbought). This may be taken as a profit-taking signal that slows the current rally.

Bullish fundamentals also helping

Commodity prices remain buoyant, with oil and copper prices up more than 1.0% on the spot market, boosted following this week’s strong China import figures and amid efforts by the PBoC to further ease financial conditions. This has continued to provide tailwinds for the Aussie, while Tuesday’s RBA meeting is likely adding to the bullish mix.

The meeting was interpreted hawkishly many analysts; according to JPM, “the commentary supports a significant drop in purchases in February, by emphasising the weight of actions already taken, and linking the path to other central banks also hastily moving toward the exit”. “The language suggests a sudden end to QE (quantitative easing) in February remains possible, but still not base case since it is probably preferable to finish a little after the Fed” the bank added. Ahead, AUD traders will be focused on monetary policy remarks from RBA Governor Philip Lowe during the coming Asia Pacific session.