AUD/USD hits fresh weekly highs at 0.7350 against a softer dollar

• The Australian dollar rallies for the third consecutive day to levels past 0.7350.
• The aussie appreciates on the back of bright employment data and USD weakness.
• The AUD/USD is about to test resistance at 0.7365.

The Australian dollar has extended its recovery from Tuesday’s lows at 0.7165 to reach fresh one-week highs right above 0.7350 favored by broad-based US dollar weakness. The pair has appreciated nearly 2.5% in a three-day rally to erase the reversal witnessed in the previous two days.

Upbeat employment data and USD weakness boost the AUD

The AUD/USD has managed to continue rallying on Thursday in a somewhat sourer market mood as the positive employment data has spurred fresh hopes of monetary tightening by the Reserve Bank of Australia.

The number of employed workers increased by 77K in February, according to the Australian Bureau of Statistics, well beyond the 37K increase expected by the market, while the unemployment rate dropped to 4%. These figures have boosted hopes that the Australian Central Bank might consider accelerating its monetary normalization plans, ultimately increasing demand for the AUD.

On the other hand, the US dollar has been trading moderately lower across the board, with US bond yields retreating from highs as the markets digest Fed’s rate hike. Investors are showing little enthusiasm for the Central Banks’ plans to gradually increase borrowing costs expressed after Wednesday's monetary policy meeting.  

AUD/USD is approaching resistance at 0.7365

The pair is now heading toward the 0.7365 area where it might find some resistance at the March 10, 11 highs, following a three-day rally.

Once above 0.7365, the next potential target would be 0.7440 (March 7 high) before aiming for October 2021 highs at 0.7555.

On the downside, a bearish reaction from current levels might seek support at the 200-day SMA, now around 0.7300 and below there, 0.7240 (March 8 low) and 0.7165 (March 15 low).

Technical levels to watch