- AUD / USD was down for the second day in a row amid widespread USD strength.
- The break below the horizontal support at 0.7220 has already set the stage for further weakness.
- Investors are now looking forward to US data / Powell’s statements for fresh trade momentum.
The pair AUD/USD It fell to lows of more than a month during the early North American session, and the bears are now pointing to a sustained break below 0.7200.
The pair struggled to capitalize on its modest intraday rally, instead meeting fresh offers on Wednesday and extending the previous day’s retracement decline from the 0.7310-15 resistance zone. This marked the second day in a row of a negative move and was sponsored by strong bullish sentiment around the US dollar.
In fact, the key USD index soared to the neighborhood of 94.00, or the highest level since November 2020, and was supported by a combination of factors. The intensification of the energy crisis in China resurfaced fears of a global economic slowdown, which, in turn, benefited the dollar’s status as a world reserve currency.
Apart from this, the prospects for an early tightening of policy by the Fed acted as a tailwind for the dollar. This, to a greater extent, helped offset the looming US debt ceiling and a modest pullback in US Treasury yields. USD bulls also did not appear to be affected by a generally positive tone in equity markets.
With the last leg down, the AUD / USD pair now appears to have confirmed a bearish breakout through the strong horizontal support at 0.7220. A subsequent fall below 0.7200 will reaffirm the negative bias and pave the way for further losses. The bears could then point back to challenge the yearly lows, around 0.7100 touched in August.
Market participants are now awaiting the release of pending home sales data. However, the focus will remain on the remarks by Fed Chairman Jerome Powell at the ECB Forum on Central Banking. This, coupled with US bond yields and broader market risk sentiment, could sway the USD and give the AUD / USD some boost.
Technical levels
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