The AUD/USD currency pair remained steady above the 0.7200 level during the Asian session on Thursday, trading near its highest point since May 14, which was reached earlier in the week [1]. Market participants are showing caution and are largely waiting for the release of key US inflation data, which is expected to provide further guidance on the Federal Reserve's policy direction and influence the US Dollar's movement [1].
Currently, US Dollar bulls are on the defensive, partly due to a hawkish Bank of Japan-inspired rally in the Japanese Yen, which has provided support for the AUD/USD pair [1]. Additionally, increasing market expectations for another interest rate hike by the Reserve Bank of Australia (RBA) later this month are underpinning the Australian Dollar and supporting the case for further near-term gains [1].
Traders are also factoring in a higher probability that the US Federal Reserve will raise borrowing costs at its upcoming policy meeting scheduled for September 15-16 [1]. However, rising tensions between the US and Iran are lending some support to the safe-haven US Dollar, which is limiting the upside for AUD/USD bulls [1].
From a technical standpoint, the AUD/USD's recent upward movement from the August monthly low has followed an upward-sloping channel, indicating a well-established uptrend and suggesting that the path of least resistance remains to the upside [1]. The Relative Strength Index (RSI) is around 58, reflecting firm but not overstretched buying pressure, while the slightly negative MACD line points to a modest loss of upside momentum rather than a clear reversal [1]. A break above the channel resistance at 0.7260 could pave the way for further gains, while initial support is seen at the 100-period SMA around 0.7172 and the channel floor near 0.7161 [1].
CONCLUSION
The AUD/USD pair is trading in a tight range above 0.7200 as markets await US inflation data for further direction. While expectations for an RBA rate hike and a weaker US Dollar support the pair, geopolitical tensions and technical resistance levels may limit gains in the near term.