The AUD/USD pair is poised for a significant move, with analysts predicting a potential break above the key resistance level of 0.7220. This forecast is fueled by the Reserve Bank of Australia's (RBA) anticipated interest rate hike, which is expected to strengthen the Australian Dollar (AUD) further.
The RBA's decision to raise interest rates, as predicted by 30 out of 33 economists, is a significant factor in the AUD's recent strength. The Q1 Consumer Price Index (CPI) growth of 4.1% annualized, higher than the previous reading, further supports the RBA's hawkish stance. This indicates a strong economy and rising inflation, which typically leads to higher interest rates.
The US Dollar (USD), on the other hand, is facing headwinds. Japan's intervention in the forex market has contributed to the USD's weakness, with the US Dollar Index (DXY) trading near its 10-day low. This negative sentiment towards the USD is expected to persist as investors focus on the US ISM Manufacturing PMI data for April, which is projected to show a higher reading.
From a technical analysis perspective, the AUD/USD pair is displaying a constructive bullish bias. The price has been trending higher since late December, and the current level above the 20-day exponential moving average (EMA) at 0.7125 suggests that buyers are in control. The Relative Strength Index (RSI) around 60 further reinforces positive momentum without indicating overbought conditions.
However, there are potential downside risks. The immediate support is at the 20-day EMA at 0.7125, and a decisive break below this level could signal waning bullish pressure. If the pair holds above this EMA, it will continue to focus on the topside, with the multi-year high of 0.7220 in sight. A break above this level could lead to further upside, potentially reaching 0.7300.
In conclusion, the AUD/USD pair is likely to continue its upward trajectory, driven by the RBA's interest rate hike and the overall strength of the Australian economy. However, investors should remain vigilant and monitor the US PMI data for any surprises that could impact the USD's performance and, consequently, the AUD/USD pair.
