AUD/USD rose on Friday and looked set to close the week higher. That matters because risk sentiment has been weak lately, so the gain should encourage investors who are long the pair.

Riskier assets struggled this week as rising European bond yields unsettled investors. Money moved into the US dollar and US Treasuries as a flight to safety. Investors also sold equities, gold, silver and copper, and AUD/USD is correlated with the last three. Risk-off conditions like these have historically pushed the pair lower. This time, AUD/USD climbed above last week's high and the psychological 0.7000 level, gaining as much as 1.3% on the week.

The technical picture appears to be building confidence among bulls. The pair is consolidating the rally from the October 15 daily low. The 10-day moving average has crossed above the 21-day, which usually reinforces signals for a bullish trend. The daily and monthly RSIs are rising but not overbought, which suggests upward momentum remains. October's monthly candle is a bull hammer, and the monthly charts also show a bull pennant continuation pattern.

Next week's focus turns to Australia's Q3 CPI report and the Fed's policy decision. If CPI shows inflation running hot and the Fed leans less hawkish, AUD/USD bulls are likely to push higher. In that case, the pair could test the 0.7150 area and September's monthly high.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)