Categories: Markets

AUD/USD clings to gains above 0.7100 after hitting a 7-month high around 0.7140

  • The AUD/USD pair continues to gain ground and advanced 0.17% on Thursday.
  • The encouraging data from the US, with higher-than-estimated GDP and declining jobless claims, justify further tightening of monetary policy by the Fed.
  • AUD/USD Price Analysis: It could pull back before resuming its uptrend, with an eye on 0.7200.

The Australian dollar (AUD) It continues to gain ground against the US dollar on Thursday, but pulls back after hitting a fresh 7-month high at 0.7142. Some of AUD/USD’s early gains were trimmed by upbeat economic data from the United States (US). Therefore, AUD/USD is trading at 0.7109, modestly above the opening price.

AUD/USD pulled back as US data lifted the USD

US economic data, growth in particular, was the main driver of Thursday’s session, beating expectations of 2.6% qoq as Gross Domestic Product (GDP) rose 2.9% in the fourth quarter , as reported by the Department of Commerce. This, along with the 3.2% expansion in the third quarter, bolstered the US dollar (USD), which has stayed afloat throughout the week. By 2022, the economy grew by 2.1%, less than in 2021, 5.9% year-on-year.

In other data also released by the US Department of Commerce, durable goods orders for December grew 5.6% mom, recovering from November’s -2.1% contraction. However, the report was mixed, as durable goods staples fell -0.2% mom. Rising interest rates, attributed to a 425 basis point hike by the US Federal Reserve (Fed) since March 2022, is weighing on demand for goods, which are typically bought on credit.

Elsewhere, the labor market continues to show resilience as the US Department of Labor reported initial jobless claims for the week ending January 21 fell to 186,000, disappointing estimates of 205,000.

Against this background, the AUD/USD pair pulled back once the data was released after hitting a daily high and failed to hold the daily R1 pivot point at 0.7139. Thus, the AUD/USD pair lost traction and fell, but the daily pivot point limited its fall at 0.7085. Meanwhile, the US Dollar Index (DXY), which tracks the greenback against a basket of six pairs, is erasing Wednesday’s losses and is up 0.19% to 101.829, a headwind for AUD/ USD.

On the Australian side, a higher-than-expected December inflation report has investors weighing the Reserve Bank of Australia’s (RBA) next move. Sources quoted by Reuters said: “Today’s report should quickly eradicate hopes of a February RBA pause.” Therefore, the Australian dollar (AUD) could continue to hold as higher interest rates loom, while the reopening of China will increase the demand for raw materials.

AUD/USD Technical Analysis

Therefore, the AUD/USD could continue its bullish trend, albeit paring some of its gains. Hitting a daily close above 0.7100 exacerbated a move higher towards a fresh 7-month high, keeping bulls hoping to test 0.7200. However, on its way north, AUD/USD needs to clear 0.7142, followed by 0.7150, and then the key psychological level 0.7200.

Source: Fx Street

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