- AUD/USD gains strong positive traction on Friday and rises to a fresh multi-week high.
- Aggressive RBA signal benefits AUD amid sustained USD selling bias.
- Indications that the Fed could pause the cycle of rate hikes and risk appetite weigh on the dollar.
The pair AUD/USD moves higher during the first half of the European session on Friday, holding near a three-week high just below 0.7150.
A combination of supportive factors helped the AUD/USD pair gain strong positive traction on Friday and break out of a multi-day trading range. The Australian dollar continued to receive support from the Reserve Bank of Australia, which signaled the possibility of a further hike in interest rates in June amid upside risks to inflation. Furthermore, the selling trend around the US dollar provided an additional boost to the pair and contributed to the current bullish move.
The minutes of the meeting of the Federal Open Market Committee (FOMC), published on Wednesday, suggest that the Federal Reserve could pause the rate hike cycle after two hikes of 50 basis points each in June and July, amid worsening economic prospects. Speculation was fueled by the release on Thursday of the US’s preliminary GDP report, which showed that the economy contracted at an annualized rate of 1.5% in the first quarter. This, in turn, dragged the benchmark 10-year government bond yield to a six-week low, which, along with the risk boost, weighed heavily on the dollar.
Meanwhile, the intraday move higher took the pair above the 0.7125 supply zone and could have set the stage for further gains. Therefore, further strengthening towards the 0.7200 level recovery now looks like a distinct possibility. The momentum could extend to the 100-day SMA, around the 0.7230-0.7235 region. Investors are expecting the US core PCE price index, the Fed’s preferred gauge of inflation, to give a further boost later in the American session.
AUD/USD technical levels
Source: Fx Street
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