The AUDUSD currency pair started its process of recovering the Friday selloff, as the meeting minutes from the Reserve Bank of Australia’s previous monetary policy meeting had a hawkish tone, despite the decision to pause their interest rate hiking cycle. With a substantial influx of buyers in the Tuesday session, the currency pair is well on its way to paring those losses. 

The meeting minutes revealed that the RBA opted for a pause to allow them more time to gather crucial information on the state of their economy. However, 25bps was considered as the economy still suffers from high inflation and a tight labour market. These developments led to expectations of further rate hikes, boosting the Australian dollar. The boost was aided by strong economic growth data from China, showing improvements in consumer spending from Australia’s primary trading partner. While the currency pair trades up, the market will remain wary of another interest rate hike from the Federal Reserve that could ignite some downside movements. 

Technical 

On the 4H chart, Friday’s selloff resulted from a second rejection of the $0.6794 resistance as the market hesitates to push higher. The currency pair bottomed from the selloff at $0.6681, whereafter, the bulls corrected in a retracement toward the Fibonacci midpoint at $0.6738. 

With bullish momentum holding, the currency pair could aim to break through this resistance toward $0.6751 and $0.6769 in a continuation of the correction. The $0.6794 resistance remains a significant barrier for the bulls, as the market respects this level. If the bullish correction loses steam, the market could consolidate while awaiting further economic information from the US. In this case, the currency pair could return to $0.6724, while neckline support could remain at $0.6681. 

Summary 

Following a strong selloff on Friday, the bulls are retracing on hawkish RBA minutes and strong Chinese economic data. If momentum persists, the Fibonacci golden ratio at $0.6751 could come into play in a continuation of the correction. However, if the market gets exhausted, the bears could shift back to $0.6724 before enforcing any further upside moves. 

Sources: Koyfin, Tradingview