With the financial markets on hold in anticipation of the US inflation data and the Federal Reserve’s interest rate decision this week, the AUDUSD currency pair rode the potential of a monetary policy divergence following the RBA’s surprise hike earlier this month. As such, the currency pair ticked up to continue the prior week’s momentum. 

The currency pair continues trading near one-month highs as the market leans toward a Federal Reserve pause on Wednesday. However, the US inflation data could change the momentum instantly, leaving traders cautious of a hawkish surprise.  

Technical 

The ascending channel on the 4H chart showed no sign of exhaustion in the Monday session, as the bulls benefitted from the daily pivot point support at $0.6729. However, the channel resistance looks vulnerable as the greenback continues to retreat. 

The resistance at $0.6774 is preventing the bulls from sustainably moving higher. The bulls could trigger the breakout if the inflation data confirms the dovish sentiment tomorrow. In this case, the momentum could push the currency pair toward higher resistance at $0.6798. 

On the opposite end of the spectrum, a hawkish surprise could halt the current run, shifting the currency pair back toward the 78.6% Fibonacci retracement at $0.6743 from the late May bottom. A breakdown of the pivot point at $0.6729 could trigger the channel breakdown at $0.6710 toward the Fibonacci golden ratio at $0.6683. 

Summary 

With the US inflation and interest rate decisions due this week, the currency pair is vulnerable to a directional break. If the dovish sentiment plays out, the uptrend could continue toward $0.6798. Alternatively, a hawkish surprise could invite the bears to push toward $0.6683. 

Sources: Koyfin, Tradingview