In a week filled with interest rate decisions from major economies, the Australian dollar came out on top, finding buyers in a bullish rally in the Friday session. While the currency pair failed to capitalise on the hawkish tone following the Federal Reserve’s decision, it reached a two-week high on Friday, as the RBA’s Statement on Monetary Policy struck a hawkish tone.
The statement revealed that the RBA would consider additional rate hikes should inflation remain sticky, defending the surprise 25bps hike it delivered earlier in the week. With the looming Non-Farm Payroll (NFP) report, there could be more price action to draw the week to a close.
The 4H chart shows an ascending channel formation, as the currency pair is under bullish control. From the 28 April lows, the bulls have retraced most of the downturn as they approach psychological resistance that has proved historically challenging.
A strong NFP report could put the sentiment around a Federal Reserve pause to bed, which could weigh on the US dollar and push the currency pair toward $0.6752 in a test of the channel resistance. A successful breakout could open a path to retesting the strong resistance at $0.6772 and $0.6805.
Conversely, a soft report could force a retest of the 78.6% Fibonacci retracement at $0.6729. If the bears break this level down, the channel support could come into play at the 61.8% Fibonacci retracement at $0.6696 before reaching the daily pivot support at $0.6679.
Following the bullish rally on Friday of a hawkish RBA statement, the NFP report could be the next driver of directional price action. A strong report could force some downside toward $0.6679, whereas a soft report could aid the bulls in retesting psychological resistance at $0.6772 if they can break through resistance at $0.6752.
Sources: Koyfin, Tradingview, Reuters
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