- A combination of supportive factors lifted AUD/USD to a fresh multi-week high on Friday.
- The technical setup favors the bulls and supports the prospects for additional gains.
- A sustained break below 0.7100 is needed to negate the constructive outlook.
The pair AUD/USD gained strong positive traction on the last day of the week and spiked above a three-week high around 0.7150 during the early American session.
Expectations that the US central authority could stop the current cycle of rate hikes later this year dragged US Treasury yields to a multi-week low. This, coupled with a generally positive risk tone, undermined the safe haven of the US dollar. This, in turn, benefited the risk-sensitive Aussie, which drew additional support from the Reserve Bank of Australia’s hawkish signal earlier this week.
Technically, the recent recovery move from last year’s low along an ascending channel points to a well-established short-term uptrend. A further move beyond the 38.2% Fib retracement level of the 0.7662-0.6829 decline, which coincided with the 200-period SMA on the 4hrs chart, favors bullish traders and supports prospects for further gains. .
AUD/USD looks set to extend momentum towards 0.7200 en route to 0.7235-0.7245 confluence. The latter comprises the 100-day SMA and the 50% Fibonacci level. It is closely followed by the all-important 200-day SMA, currently around the 0.7260 area, which if breached decisively will set the stage for an extension of the appreciation move.
On the other hand, any significant pullback seems to find good support near the 0.7125 area ahead of the 0.7100 round figure. A convincing break below could trigger an aggressive technical sell and make the AUD/USD pair vulnerable. Spot prices could test the 23.6% Fibonacci level, around the 0.7030-0.7025 region, before eventually falling to the key psychological 0.7000 level.
If the mentioned support levels are not defended, the bias will turn back to the bears. The subsequent decline could drag the AUD/USD pair down to intermediate support at 0.6940, heading towards 0.6900 and a year low around the 0.6830-0.6825 region touched earlier this month.
AUD/USD 4-hour chart
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Technical levels
Source: Fx Street
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