The AUD/USD pair is showing a strong rebound, recovering from losses caused by softer Australian consumer inflation data. During the first half of Thursday’s trading session, the pair reached a one-week high, hovering around the 0.6815-0.6820 region, recording a notable 0.80% gain for the day.
The US Dollar (USD) continues its decline for the third consecutive day as the Federal Reserve (Fed) refrains from signaling any hawkish stance. Investors are increasingly convinced that the US central bank is approaching the end of its rate-hiking cycle.
This, combined with a risk-on sentiment driven by hopes for more stimulus from China and Federal Chair Jerome Powell’s reassurance against a US recession this year, has weakened the safe-haven appeal of the USD, benefiting the risk-sensitive Aussie.
Technically, after a corrective decline from the 0.6900 mark and the formation of a bearish double-top pattern on the daily chart, the AUD/USD pair found support near the crucial 200-day Simple Moving Average (SMA) around the 0.6800 mark. The subsequent move higher and the break above 0.6800 indicate a shift in favor of bulls.
However, traders are cautious ahead of the Advance Q2 GDP report from the US, scheduled for release during the early North American session. Nonetheless, the setup suggests a potential upward trajectory for spot prices.
As a result, there is a likelihood of further upward momentum, with the AUD/USD pair aiming to test the next significant resistance at the 0.6845-0.6850 region.
A successful breach of the 0.6900 round figure will invalidate the bearish pattern and open the way towards the 0.6970-0.6975 resistance zone, leading to the psychological level of 0.7000.
Subsequently, the momentum could extend towards the 0.7050-0.7055 area, followed by the 0.7100 round figure, and potentially reaching the YTD peak of 0.7155-0.7160 touched in February.
Conversely, in case of an intraday pullback below 0.6800, decent support is expected around the 0.6760-0.6755 region. The pivotal support of the 200-day SMA, situated at approximately 0.6730, becomes crucial.
A decisive break below this level could shift the bias in favor of bearish traders, making the AUD/USD pair vulnerable to further weakness below 0.6700 and potentially heading towards the confluence support at 0.6695-0.6690, represented by the 100-day and 50-day SMAs. A sustained bearish trend would confirm the double-top pattern and expose the monthly low around the 0.6600 level.
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