AUD/USD climbs and approaches 0.7200 in a positive mood, weaker buck

• The AUD/USD begins the week on the right foot, gaining some 0.57%.
• An upbeat market mood, a weaker greenback, and expectations of a less aggressive Fed, propelled the major near the 0.7200 mark.
• AUD/USD Price Forecast: Once cleared 0.7200, the major would face a raft of supply zone; otherwise, a fall towards the 20-DMA is on the cards.

The Australian dollar marches firmly in the day, despite a thin liquidity trading session, as the US equities and bond markets remain close in the observation of the Memorial Day and would resume operations on Tuesday. At the time of writing, the AUD/USD is trading at around 0.7196, shy of the 0.7200 mark.

Positive sentiment and a weaker USD lift the AUD/USD

A risk-on mood trading session keeps the greenback on the defensive. China’s positive news regarding the Covid-19 outbreak seems to be controlled as Beijing and Shanghai get ready to ease some restrictions, aiming to propel the Chinese economy, battered by lockdowns that halted factory operations.

Alongside being boosted by market sentiment, the AUD/USD benefitted from a weaker US Dollar. Last week, the Core PCE, the Fed’s favorite gauge of inflation, although it came higher, easied from 5.1% YoY highs to 4.9%. Market players took advantage and lifted high-beta currencies and riskier assets as they began to price in a less “aggressive” approach by the US Federal Reserve.

Earlier in the day, US Federal Reserve Governor Christopher Waller said that he supports 50 bps for “several meetings,” and he’s not taking 50 bps off the table until inflation closes to the 2% target. Waller added that the balance sheet reduction it’s equivalent to a couple of 25 bps rate hikes.

Furthermore, Waller added that inflation is “stubbornly high,” and the Fed would need to be prepared to do more.

Events in the week ahead

The Australian economic calendar would feature S&P Global Manufacturing PMI, the GDP, and the Retail Sales Final.

Regarding the GDP report, analysts at Westpac noted, “We anticipate that the Australian economy will experience a robust expansion in 2022 as it reopens from the delta lockdowns of 2021, with most of the growth concentrated in Q2 & Q3. Output growth for the year is a forecast 4.5%. Growth will be centered on, but not confined to, the consumer, with consumption increasing in the order of 6% over the year – which directly adds 3.3ppts to activity.”

On the US front, the economic docket would unveil the US ISM Manufacturing and Non-Manufacturing PMIs, US employment data, led by the Nonfarm Payrolls, and the ADP and JOLTs openings report.

AUD/USD Price Forecast: Technical outlook

The AUD/USD is neutral-upward biased in the near term, distancing from the 20-day moving average (DMA) at 0.7046 and aiming toward the 0.7200 mark. However, once cleared, the major would face a wall of resistance levels, led by the 100, 50, and 200-DMAs, each at 0.7229, 0.7249, and 0.7257, reséctively.

Upwards, the AUD/USD first resistance would be 0.7200. Once cleared, the following supply zone would be the first of the above-mentioned DMAs. Once all those supply zones are removed, the next resistance would be 0.7300.

On the other hand, the AUD/USD's first support would be May 27 daily low at 0.7089. A breach of the latter would expose May 26 low at 0.7057, followed by the 20-DMA at 0.7046.