AUD/USD steady near yearly high, sideways above 0.7500

• AUD/USD was seen to consolidate its recent strong gains posted over the last two weeks or so.
• The Fed’s hawkish outlook acted as a tailwind for the USD and kept a cap on any significant gains.
• Playing a risk-on positive tone, bullish commodity prices provided some support for the resource-linked Aussie.

The pair AUD/USD traded between tepid gains/minor losses during the early American session and seems to have stabilized above the psychological 0.7500 level for now.

The pair witnessed some range-bound price action on Friday and consolidated its recent strong uptrend of over 350 pips from the monthly low around the 0.7165 region touched last week. The decline remained muted amid a generally positive tone in equity markets, which tends to benefit the perceived riskier Australian dollar.

Aside from this, rising commodity prices turned out to be another factor that acted as a tailwind for the resource-linked Australian dollar. That said, the rise of some US dollar dip buying prevented the bulls from making aggressive bets and kept a cap on any further gains for the AUD/USD pair, at least for now.

The USD was supported by expectations that the Fed would take a more aggressive policy stance to reduce unacceptably high inflation. In fact, markets have been pricing in the possibility of a 50bp rate hike move at the May meeting. This was reinforced by high yields on US bonds, which supported the dollar.

However, the AUD/USD pair now appears to have found acceptance above 0.7500 and remains on track to post strong gains for the second week in a row. The bulls are now waiting for a sustained break through resistance marked by the upper bound of a rising channel extending from the yearly low before placing further bets.

Technical levels