Australian Dollar hits three-month high as RBA rate hike bets intensify

The Australian Dollar (AUD) reached its highest level in over three months on Monday, climbing 0.22% to trade around 0.7220. This surge was driven by heightened hopes that the Reserve Bank of Australia (RBA) may raise interest rates at its upcoming policy meeting. This optimism was fueled by strong Australian Gross Domestic Product (GDP) figures released last week, which showed the economy expanding by 0.4% quarter-over-quarter and 2.1% year-over-year in the second quarter, surpassing market expectations.

Rabobank analysts believe the robust performance of the Australian economy suggests that the RBA will likely hike interest rates this month, amplifying the monetary policy divergence supporting the currency. Investors are now focusing on comments from RBA Deputy Governor Andrew Hauser, who will appear in an interview on Tuesday.

Any hints of inflationary concerns from the central bank could further bolster expectations of an imminent rate increase. Meanwhile, the US Dollar (USD) is struggling to benefit from stronger-than-anticipated US labor market data. Although the Nonfarm Payrolls (NFP) for August outpaced expectations, this positive news has not sparked significant demand for the Greenback.

The strength of AUD/USD, despite the stronger US employment figures, indicates that the market's current focus is on the possibility of tighter monetary policy in Australia. Consequently, the Australian Dollar is expected to remain supported near its highest levels since June. Technical analysis shows a bullish bias for AUD/USD, trading above the day's open and above both the 100-period and 200-period simple moving averages (SMAs).

Resistance levels are present at 0.7225, with a potential higher hurdle near 0.7278 if bullish momentum continues. Support is found at 0.7214 and 0.7198, with the 100-period SMA near 0.7183 and the 200-period SMA around 0.7179 providing additional support.