AUD/USD: 3 reasons to buy the pair in April

AUD/USD looks bullish ahead of the Reserve Bank of Australia's decision this week. The technical picture suggests that more upside is likely.

A new trading month has begun and traders are preparing for the monthly interest rate decision from Australia. Tomorrow the Reserve Bank of Australia (RBA) sets monetary policy for the next month, and the Australian dollar looks bullish, especially against the US dollar.

Before looking at the technical setup, it is worth mentioning that the RBA meets monthly. It is one of the major central banks that sticks to monthly meetings after most central banks have gone to 6 weeks between them.

Market participants expect the RBA to keep rates unchanged at 0.1%. However, AUD/USD looks bullish in early trading, even though the interest rate differential favours the US dollar.

The double bottom points to a move above 0.76
In late 2021 and early 2022, the AUD/USD exchange rate bottomed. It has formed a double bottom, a reversal pattern and the measured movement points to 0.76 and beyond.

A possible flag suggests more upside
Another pattern that suggests more upside is in shop: a pennant. The triangular formation is a continuation pattern, but this time the measured move points to 0.79 and beyond.

AUD/USD consolidates below major resistance
Finally, the pennant is forming below major resistance. The 0.75-0.76 area offered strong resistance in the past, and the market is gathering energy to break higher.

A close above the resistance area is also bullish because it signals that the series of unstable rises is over. As such, more stops are likely to be triggered and the market should move quickly from 0.76 to 0.77.

All of these technical bullish reasons seem odd given that the RBA interest rate is 0.1% and the Fed has already hiked once. Moreover, the Fed is signaling a 50 basis point rate hike in May, which would further widen the interest rate differential.

Can the RBA surprise the markets this week and propose a rate hike? Unlikely.

However, the language used could suggest that the RBA is considering normalising policy. Considering that inflation is much lower in Australia than in the US, traders would probably continue to favour the Australian dollar over the US dollar.