AUD/USD Price Forecast: Holds key 38.2% Fibo retracement cushion around 0.7100

The Australian Dollar (AUD) maintained a flat trading position at approximately 0.7117 against the US Dollar (USD) during Tuesday's European trading hours. The currency demonstrated overall strength compared to its major counterparts, primarily due to the Reserve Bank of Australia's (RBA) continued tightening of monetary conditions.

This stance, even after three interest rate hikes so far this year, indicates a hawkish policy outlook that has bolstered the Aussie Dollar's appeal in recent sessions. Analysts from Commerzbank emphasized that the probability of a 25 basis points rate hike during the upcoming RBA meeting stands at 85%, further reinforcing the bullish sentiment surrounding the AUD/USD pair.

RBA Governor Michele Bullock acknowledged a rising global benchmark for neutral rates, which is supporting bond yields. However, she cautioned that high inflation in Australia is primarily driven by energy supply shocks and a robust demand environment. On the US Dollar side, the currency continues to exhibit firmness as the Federal Reserve (Fed) is almost certain to introduce more interest rate hikes this year, with a nearly 90% probability according to the CME FedWatch tool.

In the daily chart, AUD/USD is currently trading at 0.7120, displaying a modestly bearish bias as it sits below the 20-period Exponential Moving Average (EMA) at 0.7138 and the 23.6% Fibonacci retracement level at 0.7150. While the pair has retreated from recent peaks, the Relative Strength Index (14) near 47 suggests consolidating momentum rather than a definitive trend, indicating that sellers still hold a slight advantage.

The primary support level for AUD/USD is identified at the 38.2% Fibonacci retracement at 0.7096, with additional support at the 50.0% level at 0.7052 and the 61.8% retracement at 0.7008. Conversely, resistance levels on the upside include the 20-period EMA at 0.7138, the 23.6% retracement at 0.7150, and the primary resistance near the 23.6% Fibonacci anchor at 0.7237, where the latest bullish cycle peak was recorded.