- A combination of supporting factors lifted AUD/USD to a fresh multi-week high on Friday.
- The technical set-up favours bullish traders and supports prospects for additional gains.
- Sustained break below the 0.7100 mark is needed to negate the constructive outlook.
The AUD/USD pair gained strong positive traction on the last day of the week and shot to over a three-week high, around mid-0.7100s during the early North American session.
Expectations that the US central could pause the current rate hike cycle later this year dragged the US Treasury bond yields to a multi-week low. This, along with a generally positive risk tone, undermined the safe-haven US dollar. This, in turn, benefitted the risk-sensitive aussie, which drew additional support from the Reserve Bank of Australia's hawkish signal earlier this week.
From a technical perspective, the recent recovery move from the YTD low along an upward sloping channel points to a well established short-term bullish trend. A subsequent move beyond the 38.2% Fibonacci retracement level of the 0.7662-0.6829 downfall, which coincided with the 200-period SMA on the 4-hour chart, favours bullish traders and supports prospects for additional gains.
The AUD/USD pair now seems all set to extend the momentum towards the 0.7200 round-figure mark en-route the 0.7235-0.7245 confluence hurdle. The latter comprises the 100-day SMA and the 50% Fibo. level. This is closely followed by the very important 200-day SMA, currently around the 0.7260 area, which if cleared decisively will set the stage for an extension of the appreciating move.
On the flip side, any meaningful pullback now seems to find decent support near the 0.7125 zone ahead of the 7100 round figure. A convincing break below might prompt aggressive technical selling and make the AUD/USD pair vulnerable. Spot prices could then test the 23.6% Fibo., around the 0.7030-0.7025 region before eventually dropping to the 0.7000 psychological mark.
Failure to defend the aforementioned support levels will shift the bias back in favour of bearish traders. The subsequent decline could drag the AUD/USD pair to the 0.6940 intermediate support en-route the 0.6900 mark and the YTD low, around the 0.6830-0.6825 region touched earlier this month.
AUD/USD 4-hour chart
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Key levels to watch
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