AUD/USD Price Analysis: Bulls retain control post-US Retail Sales, below 0.7050 confluence

• AUD/USD gained traction for the third successive day and surged past the 0.7000 mark on Tuesday.
• Hawkish RBA meeting minutes, the risk-on impulse benefitted the aussie amid a weaker greenback.
• Bulls might now wait for sustained strength beyond the 0.7050 confluence before placing fresh bets.

The AUD/USD pair held on to its strong intraday gains through the early North American session and was last seen trading around the 0.7020 area, just a few pips below the daily high.

The Reserve Bank of Australia, in the minutes of its last meeting released on Tuesday, signalled that a bigger interest rate hike is still possible in June amid the upside risks to inflation. This, in turn, boosted the Australian dollar and pushed the AUD/USD pair higher for the third successive day amid broad-based US dollar weakness.

The risk-on impulse - as depicted by a strong rally in the global equity markets - turned out to be a key factor that weighed heavily on the safe-haven greenback. The USD bulls seemed rather unimpressed by a goodish pickup in the US Treasury bond yields and also shrugged off stronger-than-expected US monthly Retail Sales figures for April.

From a technical perspective, acceptance above the 0.7000 psychological mark, which coincided with the 38.2% Fibonacci retracement level of the 0.7267-0.6829 fall, was seen as a key trigger for the AUD/USD bulls. The subsequent move up, however, stalled just ahead of the 0.7050 confluence resistance, which should now act as a key pivotal point.

The said barrier comprises the 50% Fibo. level and the 200-period SMA on the 4-hour chart, which if cleared decisively would set the stage for an extension of the AUD/USD pair's recovery move from the YTD low. Bulls might then aim to challenge the 61.8% Fibo. level, around the 0.7100 mark, en-route the 0.7135-0.7140 resistance zone.

On the flip side, the 0.7000 mark (38.2% Fibo. level) now seems to protect the immediate downside ahead of the 0.6970 region. This is followed by the 23.6% Fibo. level, around the 0.6935-0.6930 zone, which if broken decisively will suggest that the corrective bounce has run its course and prompt fresh selling around the AUD/USD pair.

Spot prices could then slide further below the 0.6900 round-figure mark and retest the overnight swing low, around the 0.6870 zone. Some follow-through selling would make the AUD/USD pair vulnerable to prolonging the depreciating move and challenge the YTD low, around the 0.6830-0.6825 region, before dropping to the 0.6800 mark.

AUD/USD 4-hour chart

Key levels to watch