The short-term uptrend on AUD/USD is still valid, as the pair gears up to confirm the longer-term reversal pattern seen on the daily time frame. On the 4-hour chart, the pair is retracing to the rising trend line connecting the lows of the price.

As seen on the chart, the trend line has been holding since February this year. After a few bounces off the rising support level, the pair is once again ready to make another test. This could pan out in the coming days as there are plenty of top-tier events lined up.

For the US, the advanced GDP reading is due midweek, along with the FOMC interest rate decision. Recall that the previous Fed statement turned out to be bullish for the dollar when Yellen hinted that they could hike interest rates around six months after asset purchases end. However, the FOMC minutes cast doubts on this forecast as policymakers showed preference for easier monetary policy. The upcoming rate statement could show more caution, although the Fed is still widely expected to carry on with its taper plan of reducing asset purchases by $10 billion monthly.

Meanwhile, the advanced GDP reading could show a slowdown in growth as hiring was subdued in the past few months. Moreover, the downturn in employment for the months affected by the polar vortex could weigh on overall spending and economic performance. In that case, a weaker than expected reading could trigger a dollar selloff and an AUD/USD bounce off the .9250 levels.

AUD/USD Short-Term Uptrend Test This Week

Also due this week is the non-farm payrolls report. The previous release showed a weaker than expected reading but revisions could be seen. If there are downgrades and the April reading shows a bleak result, there could be a massive dollar selloff. On the other hand, upbeat jobs figures might lead to dollar gains.

Bear in mind that Australia is also set to print its quarterly PPI this week. The previous week’s weaker than expected CPI release resulted to Aussie weakness as this lowers the odds of an interest rate hike from the RBA this year. A downbeat inflation outlook, which could be spurred by a low PPI figure, could lead to more Aussie weakness as it would hint that future inflation could keep weakening.

Prepared by Aayush Jindal, Chief Technical Strategist at Capital Trust Markets

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