AUD/USD consolidates near 0.7200 level as risk-off flows weigh in, but key uptrend still offers support

• AUD/USD is currently trading near the 0.7200 level as dovish global risk appetite weighs on the Aussie.
• For now, a key long-term uptrend from mid-December continues to offer support.

The AUD/USD consolidated near 0.7200 and above a key long-term uptrend during the US session on Friday, after pulling back sharply from Thursday’s highs at 0.7270 amid a drop in global risk appetite . Traders seemed reluctant to force a bearish break below the uptrend line that has supported price action since mid-December this close to the weekend. Any push lower may have to wait until next week, when more US equity gains are released and what is likely to be a very aggressive Fed meeting puts US stocks at risk. (and global) under increased selling pressure.

A break below the key long-term uptrend would open the door for a test of support in the 0.7150 area and then perhaps a test of yearly lows around 0.7100. At current levels, just below the 0.7200 level, AUD/USD is trading down about 0.2% for the week as a stronger dollar overall and weakness in risk assets in the second half for the week outperformed previous strength related to strong economic data from Australia. Although this week’s labor market report suggests a strong likelihood that the RBA will scrap its QE program next month and come up with rate hike guidance to enable liftoff in 2022, the meeting is still a few weeks away. While next week’s Australian Q4 Consumer Price Inflation report could further spur the RBA’s aggressive bets in favor of the Australian dollar, the AUD/USD pair remains vulnerable to currency-related USD flows. Fed and risk appetite.