AUD/USD bulls hanging in there but face firm resistance ahead

• The RBA has left the bulls in the driving seat ahead of key Us inflation data later this week and the Fed the following.
• A break of 0.7300 should lead to mitigation of the price imbalance between recent highs and potentially as far as 0.7450. 

At 0.7233, AUD/USD has failed to make a higher high in the bullish cycle on a daily basis but it may have just picked up enough demand to see the bulls equipped enough to break beyond 0.7280 in the coming days. The Reserve Bank of Australia has put its peddle to the metal which could be the deciding factor in the battle between the bulls and the bears at this juncture. 

The Reserve Bank of Australia's statement says explicitly that, “the Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead.” The stronger language that had been set out in May suggests at least another 50bp increase is on the cards over the next few months, analysts at ANZ Bank argued. ''We think August, after the Q2 CPI print and a couple more employment reports. For July we’ve pencilled in a 25bp move at this stage, with 50bp clearly being a live option.''

However, the analysts also warned that  Australians’ consumer confidence dropped 4.1% last week, to its lowest level since mid-August 2020. ''This most likely reflected cost-of-living concerns as inflation expectations rose to 5.7%, its highest weekly reading since early April. Consumers are especially pessimistic about the current economic outlook and their current financial circumstances.''

Meanwhile, there is little reason for the Fed to ease up anytime soon, as analysts at RBC Economics argued. ''With the US economy running hot, the Fed is moving “expeditiously” to a more neutral policy stance.''

The analysts there explained that the Fed's Chair Jerome Powell noted broad consensus on the committee that 50 bp hikes should be on the table at upcoming meetings—we’re with the market in thinking such moves are a virtual lock in June and July. ''We look for the Fed to revert to 25 bp hikes in September though it could continue with larger increments—a number of policymakers think front-loading hikes will put the committee in a better position later this year to evaluate the impact of tightening and assess whether more is needed.''

Markets will now look to this week's US inflation data to see if the dynamics there will offer anything to sway sentiment one way or the other, in the absence of Fed speakers this week. The date will be key to that assessment with the Fed wanting to see clear evidence that inflation is moving toward its 2% target before easing up on rate hikes.

AUD/USD technical analysis

The price has picked up demand at old resistance and that could carry the bulls through the overhead daily resistance in the coming days. A break of 0.7300 should lead to mitigation of the price imbalance between recent highs and potentially as far as 0.7450.