AUDUSD has been trending higher on its short-term time frames, moving inside an ascending channel visible on the 1-hour and 4-hour charts.

Price is currently testing the top of the channel around the .7700 major psychological level and might be due for a drop towards support.

The 100 SMA is right around the channel support at the .7550 minor psychological level and is also above the 200 SMA. This suggests that the path of least resistance is to the upside and that further gains might be in the cards.

Stochastic is on the move down, though, so a short-term selloff to the channel support is possible. If you’re hoping to follow the trend, better wait for an actual support test or for the oscillator to indicate oversold conditions.

There are several major events lined up from Australia over the next few days, including the release of retail sales and trade balance data. Also lined up is the RBA interest rate decision during which the central bank might reiterate its upbeat bias and lead to more gains for the Australian currency.

As for the US dollar, it was able to get a boost from the stronger than expected NFP release last Friday. The economy added 215K jobs versus the projected 206K increase but the unemployment rate rose from 4.9% to 5.0%. Average hourly earnings rose 0.3% versus the estimated 0.2% uptick to indicate stronger wage pressures.

The FOMC minutes are up for release midweek and dovish remarks could mean more losses for the US dollar later on. Recall that the Fed reiterated its plan to be cautious about tightening and their focus on inflation.

By Kate Curtis from Trader’s Way