August 1, 2022 9:18:33

The risk-sensitive Aussie started the new session on a higher note. A weakness in the US dollar and risk-on mood set the gains in the major.

The US dollar index (DXY) continues to trade lower following a less hawkish Fed stance. A slew of economic data points out that the largest economy might enter into a recession. This could mean a less aggressive monetary tightening from the central bank moving ahead. The advance GDP data for Q2 showed the US economy shrank by 0.9%, following a 1.6% drop in the previous quarter. The Fed raised interest rates by 75bps against a hike of 100bps.

Furthermore, investors are bracing up for the Reserve Bank of Australia (RBA)  meeting on Tuesday, where the market is expecting another 50bps rate hike to 1.85% to tame surging inflation.

Despite the disappointing Ai Group Australian Manufacturing PMI data, which dropped to 52.5 in July as compared to 54 in the previous month, and S&P Global Australia Manufacturing PMI read at 55.7 in July from 56.2 in the last month, the Australian dollar gains on improved risk sentiment.

In addition, a rise in commodity prices also helped AUD/USD gain.  

AUD/USD Bulls Aim for 0.7050

The price breached the descending trend line and renewed the previous week’s high at 0.7036. On the daily chart, the AUD/USD pair faces the bearish trend line rejection at 0.7282 on June 3. Since then price remained in the selling mode.

However, since July 14 after forming a bullish hammer candlestick, the price rose nearly 250-pip. In addition to that, a smooth sail of the critical 20-day and 50-day EMA points to the continuation of the upside momentum.

An acceptance above 0.7050 would open the gates for further gains. AUD bulls ask for the 0.7200 horizontal resistance level if the bullish sentiment remains in action.

The MACD depicts a neutral picture as it hovers near the midline.

Alternatively, good support is playing around  50-day EMA at 0.6950.