AUD/USD has reversed its overnight losses, aided by improved risk sentiment, while recent central bank commentary and technical indicators suggest the odds of a rally have increased. The Reserve Bank of Australia kept rates unchanged at its latest meeting, but Governor Michele Bullock struck a notably hawkish tone in the post-meeting press conference, stating that another rate hike remained "quite possible" and confirming that a hike was actively discussed during the meeting. This rhetoric fueled a rally in Australian interest rates, with the 3-year government bond yield climbing to a nine-session high.

The combination of hawkish RBA signaling and broader risk-on sentiment has pushed technical indicators for AUD/USD further into bullish territory. After dipping toward the 10-day moving average, the pair rebounded, forming a bullish daily hammer candlestick, while the daily RSI turned higher once again. The pair's ability to hold above its 10-, 21-, and 55-day moving averages reinforces this positive structure. On a longer-term basis, monthly signals are equally supportive, with the RSI pointing to sustained upward momentum and a monthly bull hammer forming in August.

Attention now shifts to upcoming U.S. July CPI and PPI data. Should the figures align with expectations or point toward disinflation, markets may price in a less hawkish Fed stance , likely putting downward pressure on U.S. yields

and the dollar. Such an outcome could reignite AUD/USD's rally from its June low, with bulls potentially targeting key resistance near 0.7200.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)