• AUD/USD trades higher on Monday after US data last week surprised to the downside, weighing on USD. 
• The RBA could adopt a hawkish tone at their meeting on Tuesday, supporting the AUD. 
• AUD/USD is in a short-term uptrend with the bias favoring long holders. 

AUD/USD trades higher on Monday, up by a quarter of a percent in the 0.6620s, propelled mainly by a depreciation of the US Dollar (USD) after the release of weaker-than-expected US data at the end of last week. 

On Friday, data from the US Bureau of Labor Statistics (BLS) showed US Nonfarm Payrolls in April undershot expectations, Average Hourly Earnings dipped below forecast and the Unemployment Rate ratcheted up a notch. 

Additionally, data from S&P Global showed US Services PMI fell in contraction territory. Given Services wage inflation has been a primary concern of the Fed the decline is significant. Overall the data suggests the economy is cooling and the Federal Reserve (Fed) will be much more likely to cut interest rates before the end of the year. This is negative for USD since lower interest rates attract less foreign capital inflows. 

The Australian Dollar (AUD), meanwhile, stays firm on expectations the Reserve Bank of Australia (RBA) will keep interest rates unchanged at their meeting on Tuesday and possibly even adopt a more hawkish tone, on the back of continued stubbornly-high inflation data. Recent data showed Inflation in Q1 in Australia surprised to the upside, reinforcing the notion that of all the G10 central banks, the RBA is likely to be the last one to cut interest rates. 

There is even a possibility the RBA could surprise markets with a interest-rate hike, according to some analysts. 

“Cash rate futures are still pricing in around a 40% chance of another rate hike from the RBA. However, cash rate futures are yet to trade following the market moves in the US,” said analysts at Westpac in a note on Monday. 

In such a scenario, the Australian Dollar would surge with AUD/USD extending its short-term uptrend higher, probably surpassing the 0.6686 March high and touching 0.6700.