FX.co ★ UFCworriers | AUD/USD

AUD/USD holds its bullish trend during the Asian session on Wednesday and trades near the 0.7220-0.7225 range, just below its recent high from Tuesday. The spot price has been relatively flat on the back of the Chinese inflation data. According to the National Bureau of Statistics of China, the headline Consumer Price Index (CPI) rose 0.8% Y-o-Y, up from 0.5%. Additionally, annual CPI inflation came in at 0.4% MoM, up from -0.1% in July and above forecasts of 0.3%. What is more, China's Producer Price Index (PPI) soared by 3.8% Y-o-Y in August, better than the forecast of 3.7% and up from 3.5% in the preceding month. However, the figures provide no support for the Aussie as a proxy for the Chinese economy, although several factors continue to support the AUD/USD currency pair. Markets are increasingly betting on an RBA rate hike at the end of this month, driven by unexpected economic growth and persistent inflation. This has kept the Australian Dollar (AUD) supported, while the US Dollar (USD) stays subdued after touching its lowest level in more than two weeks, amid a strong rally in the Japanese Yen (JPY) fueled by the BoJ. This is believed to keep the AUD/USD pair supported. However, traders remain cautious about betting in either direction until US inflation data is released this week. US PPI is scheduled to come out on Thursday, ahead of the US CPI release on Friday. These releases are expected to offer more clues on the Fed's stance and its decision-making process on policy changes, which would in turn determine USD demand and the value of the AUD/USD pair. However, with the probability of rising US interest rates amid inflation concerns driven by rising energy costs, coupled with escalating tensions between Iran and the US, the safe-haven USD could find some support. AUD/USD moves around 0.7220 on the daily chart, showing strong bullish technicals with price above the Ichimoku cloud and rising short- and medium-term moving averages. The rally has built from the July low at 0.6825 and has formed a clear pattern of higher highs and higher lows. Price is currently attempting to break through 0.7220. The Ichimoku cloud configuration supports the bulls. Spot is sitting solidly above the cloud formation, while the future cloud continues to slope positively, suggesting a favorable outlook for the trend. The blue and red lines sit below current spot prices. As long as AUD/USD sits above these levels, any retracements are likely to be seen as simply corrective. However, momentum is now becoming stretched. RSI on the daily chart stands at 68.49, nearing the overbought level of 70, and the Stochastic Oscillator is around 95, indicating buyers have taken positions to an extreme. The MACD line remains positive, confirming the current upward trend despite the recent flattening, which suggests upward momentum is losing strength. This increases the odds of price consolidating or correcting toward the resistance level. In the upside direction, 0.7233 is the nearest level of resistance, followed by 0.7255 and the larger 0.7278 range. A strong daily close above 0.7233 will further confirm the breakout pattern and open up the resistance levels.