The AUD/USD pair continues its impressive recovery and steadily approaches the significant resistance level of 0.6700 during the European trading session. The Australian dollar shows renewed strength while the US Dollar Index (DXY) experiences a decline.
In broader terms, market participants expect the USD Index to remain range-bound as they await the release of the United States Consumer Price Index (CPI) for further guidance on potential market movements.
In light of deteriorating Australian economic prospects, the Australian Dollar has surprisingly gained strength as speculators anticipate the Reserve Bank of Australia (RBA) to persist with interest rate hikes. According to a Reuters poll, it is predicted that the RBA will increase its Official Cash Rate (OCR) by an additional 25 basis points (bps), reaching 4.35%.
Despite a breakdown in consolidation within the 0.6563-0.6808 range on a daily scale, AUD/USD witnessed responsive buying, leading to a significant recovery. This suggests that investors view the asset as a valuable investment opportunity.
The Australian dollar has surpassed the 20-period Exponential Moving Average (EMA) at 0.6607, signaling a shift in the short-term trend towards a bullish outlook.
Furthermore, the Relative Strength Index (RSI) (14) has rebounded from the bearish range of 20.00-40.00 into the 40.00-60.00 range, indicating a decrease in downside momentum.
Should AUD/USD break above the recent high on June 7th at 0.6718, bullish momentum is expected to push the Australian dollar towards the April 18th high at 0.6748, followed by the May 10th high at 0.6818.
On the contrary, if AUD/USD breaks below the June 1st low at 0.6484, the US Dollar bulls would likely take control, driving the asset towards the November 1st, 2022 high around 0.6464, with the round-level support at 0.6400 serving as the next target.
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