AUD/USD consolidates hawkish RBA-inspired rally to the highest level since June 2021

• AUD/USD jumped to a fresh YTD peak in reaction to the RBA’s hawkish commentary on Tuesday.
• The Ukraine crisis underpinned commodities and further benefitted the resources-linked aussie.
• Technical buying above the 0.7600 mark also contributed to the strong intraday bullish move.

The AUD/USD pair maintained its strong bid tone through the mid-European session and now seems to have entered a bullish consolidation phase. The pair was last seen trading around the 0.7630 region, or the highest level since June 2021.

The pair added to the previous day's positive move and gained strong follow-through traction on Tuesday in reaction to a more hawkish commentary by the Reserve Bank of Australia (RBA). As was expected, the Australian central bank decided to hold the key rate at a record low but dropped its pledge to be patient on tightening policy.

In the accompanying policy statement, the RBA noted that the domestic economy remains resilient, and spending is picking up following the omicron setback. The markets were quick to react and started pricing in the first-rate hike in over a decade during the third quarter. This, in turn, provided strong lift to the Australian dollar.

Apart from this, the prospect of more Western sanctions on Russia continued acting as a tailwind for commodity prices, which was seen as another factor that benefitted the resources-linked aussie. In fact, French President Emmanuel Macron pressed for more severe sanctions on Russia following reports of atrocities in the Ukrainian town of Bucha.

The combination of supporting factors, along with subdued US dollar price action, pushed the AUD/USD pair to the fresh YTD peak, taking along some short-term trading stops near the 0.7600 mark. This, in turn, confirmed a near-term bullish breakout through an ascending channel extending from sub-0.7000 levels and supports prospects for additional gains.

That said, a slightly overbought RSI might hold back bulls from placing fresh bets amid expectations that the Fed tighten its monetary policy at a faster pace to combat high inflation. It is worth mentioning that the markets anticipate a 100 bps Fed rate hike move over the next two meetings, which was reinforced by elevated US Treasury bond yields.

Hence, the market focus will remain glued to the FOMC monetary policy meeting minutes, scheduled for release on Wednesday. Nevertheless, the near-term setup favours bullish traders, suggesting that any meaningful pullback might still be seen as a buying opportunity. Traders now look forward to the US ISM Services PMI for some short-term opportunities.

Technical levels to watch