- A combination of factors assisted AUD/USD to gain traction on Wednesday.
- A goodish pickup in the USD demand kept a lid on any meaningful upside.
- The formation of an upward sloping trend channel favours bullish traders.
The AUD/USD pair edged higher on Wednesday and might now be looking to build on the overnight rebound from the vicinity of the mid-0.7000s support zone.
The Australian dollar drew support from the Reserve Bank of Australia's hawkish signal that a bigger interest rate hike is still possible in June amid the upside risks to inflation. Adding to this, a modest bounce in the global risk sentiment further benefitted the risk sensitive aussie, though the emergence of some US dollar buying capped gains ahead of the FOMC minutes.
From a technical perspective, the recent strong recovery from the YTD low has been along an upward sloping channel, which points to a well-established short-term bullish trend. The lower boundary of the said trend channel coincides with the 100-hour SMA and should act as a pivotal point. This is closely followed by the 23.6% Fibonacci retracement of the 0.6829-0.7128 rally.
A convincing break below the latter will be seen as a fresh trigger for bearish traders and prompt aggressive technical selling. The AUD/USD pair might then accelerate the downfall towards the 38.2% Fibo. level, around the 0.7015 region. The bearish trend could further get extended towards the 0.7000 psychological mark en-route the 50% Fibo. level near the 0.6980 area.
On the flip side, momentum beyond the weekly high, around the 0.7125 region, has the potential to lift spot prices to the ascending channel resistance, around the 0.7175-0.7180 zone. Some follow-through buying would mark a fresh bullish breakout and pave the way for a move beyond the 0.7200 round figure, towards testing the 200-day SMA, currently around the 0.7260-0.7265 area.
AUD/USD 1-hour chart
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Key levels to watch
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