AUD/USD hangs on to gains near weekly high just below 0.7350

• A combination of supportive factors led AUD/USD to a new weekly high on Thursday.
• Upbeat Australian jobs data supported the Australian dollar and extended support amid a weaker USD.
• Sustained strength beyond the 0.7360-65 region would be seen as a new trigger for the bulls.

The pair AUD/USD maintained its strong bid tone during the early American session and was last seen near the weekly high just below 0.7350.

The pair gained traction for the third day in a row on Thursday and is now up nearly 200 pips from the monthly low around the 0.7165 region touched earlier this week. The Australian dollar received support from the upbeat domestic employment report, which showed the jobless rate fell to its lowest level since August 2008. The data raised bets for an early interest rate hike by Bank of America. Reserve and Australia acted as a tailwind for the Australian dollar.

On the other hand, signs of progress in ceasefire talks between Russia and Ukraine and hopes for a diplomatic solution to end the war continued to undermine safe-haven demand for the US dollar. Apart from this, the fall in US Treasury bond yields further affected the dollar, which, in turn, provided an additional boost to the AUD/USD pair. That said, the Fed’s dovish outlook coupled with mostly better-than-expected US macroeconomic releases helped limit dollar losses.

The Fed on Wednesday announced the start of the policy tightening cycle and raised its target interest rate for the first time since 2018. The Fed also hinted that it would take a more aggressive policy stance to combat high inflation. The so-called dot plot indicated that the Fed could raise interest rates at the remaining six meetings in 2022. Fed Chairman Jerome Powell added that the US central bank could start cutting its balance sheet as soon as as in the next meeting in May.

On the economic data front, US weekly initial jobless claims fell more than expected to 214,000 from the previous upwardly revised reading of 229,000 and pointed to strong demand for workers. Adding to this, the Philadelphia Fed manufacturing index jumped to 27.4 in March against expectations of a drop to 15 from 16 in the previous month. Aside from this, an intraday pullback in equity markets extended some dollar support and could cap gains for the AUD/USD pair.

The mixed fundamental backdrop warrants some caution for aggressive traders and before positioning for any further appreciation moves for the AUD/USD pair. Therefore, the bulls are likely to wait for some follow-up buying beyond the 0.7360-0.7365 region before placing further bets. This should pave the way for a move back towards the recovery towards the 0.7400 level en route to the yearly high, around the 0.7440 area touched earlier this month.

Technical levels