AUD/USD Hits 4-Month High on Rate Hike Expectations
The AUD/USD currency pair reached its highest level in nearly four months on Monday and maintained this strength into Tuesday, despite initially selling off after a better-than-expected US jobs report. The pair's resilience can be attributed to growing expectations of a domestic interest rate hike later this month, which now have a 70% chance according to markets.
However, the outlook for the pair remains uncertain as traders will closely monitor key US inflation data readings this week. Hotter-than-expected prints could strengthen the Greenback and pause the Australian dollar's rally, while softer inflation data may underpin the pair's recent strength.
The technical structure of the AUD/USD shows a pennant pattern breaking down on Tuesday, with the 50 moving average providing near-term support. Key support levels to monitor include 0.7205, 0.7185, and 0.7165, while important overhead levels worth watching are at 0.7225.
Traders will pay close attention to this week's US inflation data to determine if the AUD/USD rally has further to run or is due for a retracement. Numbers supporting a more hawkish Fed would narrow the interest rate expectation outlook between the two central banks and potentially see profit-taking in the pair.