- AUD / USD is holding onto gains from the recovery, but a further rally looks elusive.
- Risk increased amid a pullback in Treasury and USD yields, stabilizing the bond market.
- A death cross on the 1 hour chart could be cause for concern ahead of the US ISM PMI.
AUD / USD is consolidating its recovery around the 0.7750 region, after hitting two-week lows at 0.7692 on Friday.
The Australian dollar rose to a high of 0.7772 amid a return in risk appetite in the markets and following the release of upbeat Australian house prices and employment data, although it did not hold higher thereafter. Caixin’s Chinese Manufacturing PMI disappointed markets.
The recovery in risk sentiment could be attributed to the stability seen in global bond markets after last week’s carnage that sent yields skyrocketing.
Rising Treasury yields around the world raised concerns about premature tightening of central banks, in light of rising growth and inflation expectations.
The rally in Treasury yields spooked markets and pushed the safe-haven US dollar higher at the expense of higher-yielding currencies such as the Australian dollar.
Markets are now turning their attention to the release of the US ISM Manufacturing PMI and the RBA’s monetary policy decision on Tuesday for fresh trade momentum.
In the meantime, the pair will continue to pick up signals from the general market’s confidence and returns.
AUD / USD: Technical perspective
As seen on the 1-hour chart, AUD / USD is looking to retest the daily highs at 0.7772, having defended the 21-hour moving average at 0.7742 so far.
Despite the renewed bullish attempt, the bulls remain cautious amid a confirmed death crossover in said time frame. The 50 hourly SMA crossed the horizontal 200 SMA from above, representing a bearish crossover.
The 21-hour SMA could be broken if the selling pressure returns, below which the resistance of the descending channel could now be tested at 0.7670.
Keep in mind that the price marked the breakdown of a descending channel at the beginning of the Asian session.
The RSI is rising but remains below the 50 level, which suggests that the downside bias still remains intact.
AUD / USD 1 hour chart
AUD / USD technical levels
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