AUD/USD surges to 1-1/2 week highs, inching closer to mid-0.7400s

The AUD/USD pair continued gaining traction through mid-European session and surged to near 1-1/2 week highs around 0.7440-45 region. 

Against the backdrop of Friday's weaker US macro data, persistent greenback selling pressure, with the key US Dollar Index sliding further below the 99.00 handle, has been a key factor contributing to the strong bid tone surrounding the major. 

Adding to this, the pair’s strong up-move at the beginning of a new trading week could also be attributed to a goodish recovery in commodity prices, especially copper, which derives demand for commodity-linked currencies, including the Australian Dollar. 

Moreover, possibilities of some stops getting triggered, on sustained break through 0.7425-30 strong resistance, could have further collaborated to the pair's strong up-surge in the past hour or so.

Meanwhile, market seems to have shrugged off disappointing Chinese economic data, which tends to derive demand for China-proxy Australian Dollar, with the broader bearish sentiment surrounding the greenback acting as an exclusive driver of the pair's strong up-move to its highest level since May 3.

It, however, remains to be seen if the up-move is back by any genuine buying or turns out to be a stop run amid growing prospects for an eventual June Fed rate-hike move, which should continue extending support to the US treasury bond yields and restrict any further up-move for higher-yielding currencies - like the Aussie.

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Next on tap would be the US economic docket, featuring the release of Empire State Manufacturing Index, which should provide some short-term trading impetus ahead of the release of RBA monetary policy meeting minutes during early Asian session on Tuesday. 

Technical levels to watch

From current levels, 0.7460 level is likely to act as immediate resistance, above which a fresh bout of short-covering has the potential to continue lifting the pair further towards the key 0.75 psychological mark. On the flip side, retracement back below 0.7430-25 area now seems to find fresh buying interest near the 0.7400 handle, which if broken should accelerate the slide even below 0.7385 level (session low) towards retesting 0.7365 support area.