AUD/USD bulls approach 0.6700 as RBA’s Lowe sounds hawkish, Australia GDP eyed

AUD/USD justifies hawkish comments from Reserve Bank of Australia (RBA) Governor Philip Lowe, as well as the RBA’s surprise rate lift, as it grinds higher past 0.6650 during Wednesday’s Asian session. In doing so, the Aussie pair rises for the fifth consecutive day while making rounds to the highest levels in three weeks, marked the previous day, amid a cautious mood ahead of Australia’s first quarter (Q1) Gross Domestic Product (GDP).

Earlier in the day, RBA Governor Lowe defended the Aussie central bank’s second consecutive hawkish surprise by saying that June rate rise followed information suggesting greater upside risks to bank’s inflation outlook. The policymaker also stated, “Some further tightening of monetary policy may be required, depending on how economy and inflation evolve.”

It’s worth noting that Australian Treasurer Jim Chalmers also backed the RBA’s surprise rate hike announcement at a press conference on Tuesday by saying, “It is ‘not our expectation the economy will head into recession.’”

On a different page, hopes of improving the US-China and the Canberra-Beijing ties join the market’s cautious optimism, as well as receding hawkish Fed bets to also underpin the AUD/USD pair’s run-up.

Late on Tuesday, Reuters said that Fed funds futures traders see the Fed as likely to then resume rate increases, with a 65% chance of an at least 25 basis-point increase in July, according to the CME Group's FedWatch Tool. It’s worth mentioning that the interest rate futures show a nearly 15% probability of a June rate hike. The reason could be linked to downbeat United States activity data released on Monday, as well as the previously dovish comments from the Federal Reserve (Fed) Officials ahead of the pre-Fed blackout.

Amid these plays, S&P500 Futures grind higher as the technology stocks remained firmer but the manufacturing ones weighed on the sentiment and pared Wall Street’s gains. Even so, the US equities closed with minor gains.

Moving on, the Aussie Q1 GDP, expected to ease to 0.3% QoQ from 0.5% prior, may allow the AUD/USD buyers to catch a breather. However, any surprise positive won’t be taken lightly. Also important to watch will be the monthly trade numbers from China and the Fed concerns.

Technical analysis

An upside break of the previous support line stretched from early March, around 0.6620 by the press time, joins successful trading beyond the 50-DMA of around 0.6665 to enable the AUD/USD bulls to aim for the 200-DMA hurdle of near the 0.6700 threshold.