AUD/USD bulls move in for the kill but bears are lurking ahead of RBA

• AUD/USD jump on the US Dollar´s weakness.
• The RBA will be the key event for the day ahead. 
• AUD/USD´s bearish pennant is still in play. 

AUDUSD increased to a 4-week high of 0.67585 as the US Dollar slumped on Monday, surrendering earlier gains following unexpected oil output cuts from OPEC+. US data showed that the US economy continued to slow with declines in manufacturing and construction spending.

The data on Monday added to the narrative that the Federal Reserve is near the end of its rate-hike cycle. March manufacturing ISM dropped 1.4pts in March to 46.3, its lowest reading since May 2020. ´´A weakening trend has been in place since May last year (56.1), but recent banking turmoil may have dented confidence further,´´ analysts at ANZ Bank said. 

´´New orders fell to 44.3 vs 47.0. Manufacturing is one of the most rate-sensitive sectors of the economy as goods like autos are primarily bought on credit. There continues to be encouraging news on goods inflation. Supplier delivery times fell 0.4 to 44.8, its lowest level since March 2009, and the prices sub-index fell 2.1pts to 49.2.´´

Meanwhile, the Reserve Bank of Australia will be the highlight for today in Asia. ´´We expect a 25bp hike in the cash rate from the RBA today, but the decision will be finely balanced,´´ analysts at ANZ Bank said. ´´ Looking at the four data releases Governor Lowe highlighted as guiding the decision, we see ongoing resilience: unemployment fell back to 3.5%; NAB business conditions remain robust, price and cost growth remained elevated and firms are still in hiring mode; retail sales were softer at +0.2% m/m, but services spending remained solid; and finally, the monthly Consumer Price Index showed inflation momentum is not slowing as much as the fall in annual inflation would suggest.´´

The analysts concluded all of the above and said, ´´the probability of a pause is the highest it’s been in some time.´´

AUD/USD technical analysis

Ahead of the event, the pair broke the resistance of the bearish pennant. While this is going against the grain, it is not uncommon to see such a move for the price only to reverse and eventually break out and not come back in the direction of the chart pattern. However, in the meantime, the bias is bullish while above 0.6700:

The W-formation would be expected to pull on the price towards support as illustrated. If the bulls commit to the trajectory, then a break of 0.6800 is needed to expel the downside bias of the overriding long-term chart pattern: