• Aussie trades higher around multi-day high level of 0.7420.
• Hawkish RBA Minutes, Shanghai reopening news underpins the uptrend of Aussie.
• Hawkish Fed bets acts as a headwind for the uptrend of Aussie.

The Australian dollar edged higher against the American dollar during Wednesday trading session amidst hawkish RBA minutes and Shanghai reopening favoring the Aussie.

The RBA minutes revealed that the central bank expects inflation to pick up and that recent developments have brought forward the likely timing of the first-rate hike.

Two things stand out from the April RBA Minutes, analysts at ANZ Bank said as being the following:

• the case for a cash rate move in June rather than May was strengthened; and
• the prospect of changes in the gap between the cash rate target and the interest rate on exchange settlement balances was flagged.

The encouraging news from Shanghai favored the Aussie. The officials said Wednesday that “the epidemic situation in the city has shown a downtrend in recent days.” The city is set to reopen, with some factories returning to production in closed-loop systems.

Additionally, the conflict in Ukraine has lifted prices for many commodities, boosting the terms of trade for resource-rich Australia.

On the other hand, hawkish fed bets could act as a headwind on the bullish trend for Aussie. Fed’s Jim Bullard reiterated that he wants to quickly get rates up to 3.5%, noting, “You can’t do it all at once, but I think it behoves us to get to that level by the end of the year.”

He added that “more than 50 bp is not my base case at this point.  I wouldn’t rule it out, but it is not my base case here.”  Additionally, he said, “we want to get to neutral expeditiously, I guess is the word of the day.  I’ve even said we want to get above neutral as early as the third quarter and try to put further downward pressure on inflation at that point.”

Meanwhile, Charles Evans, Chicago Fed President said that there is good reason to think the US economy will do very well even as rates rise. He added that the Fed needs to be mindful of a possible wage-price spiral when noting that Fed needs to monitor this.

AUD/USD 4 Hour Chart:

Support: 0.7347 (S1), 0.7318 (S2), 0.7292 (S3).

Resistance: 0.7401 (R1), 0.7427 (R2), 0.7456 (R3).

The hawkish RBA minutes and the Shanghai news encourages Aussie to trade high. we expect a bullish trend for AUD/USD.