AUD/USD extends its weekly rally, though capped around 0.7140s

• The AUD/USD is up almost 2%, after Friday’s low at 0.6993.
• A risk-on market mood favors risk-sensitive currencies, so the Australian dollar rises.
• AUD/USD Price Forecast: Tilted to the upside but facing strong resistance in the 0.7140-50 range.

The Australian dollar continues its advance during the week, up 1.9% from Friday’s low at 0.6993, trading at 0.7148, during the New York session at the time of writing. In the overnight session, upbeat news regarding vaccine effectiveness against the omicron strain maintained the appetite for riskier assets. Early lab studies about two of the most successful vaccines showed that a third dose of the COVID-19 vaccine neutralizes the omicron variant.

That said, during the Asian and European sessions, the AUD/USD extended its gains, trading above Tuesday’s high 0.7122, though stalled around the confluence of October 23, 2020, high and the R1 daily pivot around the  0.7157-47. 

On Tuesday, the Reserve Bank of Australia (RBA) kept its cash rate on hold at 0.10% and said it would continue its QE program until at least the middle of February, as reported by the central bank. 

RBA Governor Philip Lowe commented that RBA’s board would not increase the cash rate unless inflation is sustainably within the 2-3% target range. He further said that “The economy is expected to return to its pre-Delta path in the first half of 2022.” Regarding the omicron variant, Lowe added that it is a new source of “uncertainty, but it’s not expected to derail  the recovery.”

The AUD/USD reacted to the upside. However, it seems that USD bulls took some profits as the market waits for the US Consumer Price Index for November to be released on Friday after Fed policymakers further emphasized the need for a faster bond taper, led by Fed’s Chair Jerome Powell.

AUD/USD Price Forecast: Technical outlook

In the 4-hour chart, the AUD/USD is trading within the 50 and the 100-simple moving average (SMA), at 0.7123 and 0.7171, respectively. Despite trading below the 200-SMA, the break of a month and a half downslope trendline coinciding with the Australian dollar breaking to the upside of the 50-SMA has the pair bias as bullish. However, a clear break of the 100-SMA could pave the way for further gains.

In that outcome, the first resistance would be 0.7200. The breach of the latter would expose a five-month upslope trendline, previous support-turned-resistance around 0-7266-80, immediately followed by the 200-SMA at 0.7302.