The Australian dollar continues to gain support following the Reserve Bank of Australia's decision to raise it to 4.35%, reinforcing its aggressive stance amid persistent inflation. Authorities have signaled that inflation remains elevated and may require a longer period of tight monetary policy, keeping alive expectations of further tightening.
This outlook is strengthened by a favorable interest rate differential, especially as markets reassess the pace of Fed easing. While the US dollar remains supported by resilient data and elevated yields, the recent change in momentum suggests that the AUD is currently benefiting more from relative political strength.
At the same time, current geopolitical tensions and elevated energy prices continue to influence global inflation dynamics, indirectly supporting central banks' cautious approach to easing.
Technical analysis (H4)
On the H4 chart, AUD/USD shows a clear bullish continuation after previously trading within a decision zone. The price has successfully broken through the key resistance area around 0.7222 and is now trading higher, indicating strong buying momentum.
This breakout confirms that the market structure remains in a solid uptrend, with a possible continuation towards the next key level around 0.7294.
Currently, the price remains above the breakout zone and forms a new potential support area (previous resistance) between 0.7222 and 0.7170. As long as the price remains above this zone, the bullish bias will remain intact.
However, considering the strength of the recent move, a short-term pullback remains possible before the rally continues.
Conclusion
AUD/USD has confirmed its bullish scenario with a strong breakout, supported by both aggressive fundamentals and continuation technical patterns. As long as the price remains above the newly established support zone, the outlook remains bullish with potential for further gains.
That said, traders should be cautious of short-term corrections and keep an eye on upcoming US data, which could influence the strength of the USD and impact the pair's next move.
