- AUD/USD witnessed a short-covering intraday move from the new year-to-date low set earlier this Tuesday.
- Pulling back US bond yields and boosting risk appetite undermined the safe-haven USD and provided support.
- The lack of buying and following acceptance below 0.7000 favors the bearish traders.
The pair AUD/USD staged a nice recovery from its lowest level since June 2020 hit earlier this Tuesday and maintained its modest intraday gains during the early American session. The pair was last seen trading around the 0.6970 region, up nearly 0.25% on the day.
The ongoing pullback drop in US Treasury bond yields, coupled with the boost in risk appetite, weighed on the safe-haven US dollar and benefited the perceived riskier Australian dollar. That said, any significant upside still seems elusive amid prospects for more aggressive policy tightening by the Fed, which should continue to act as a tailwind for the dollar.
From a technical perspective, the overnight advance into the psychological 0.7000 level and a subsequent drop below the previous yearly low around the 0.6965 area marked a new bearish breakout point. Furthermore, the inability of the AUD/USD pair to capitalize on the intraday rebound suggests that a month-long downtrend may still be far from over.
The negative outlook is reinforced by the fact that the technical indicators on the daily chart remain in bearish territory and are still far from being in the oversold zone. Therefore, any further rally could still be seen as a selling opportunity. That said, traders may refrain from placing any new bets ahead of Wednesday’s US CPI report.
Meanwhile, 0.7000 now appears to act as an immediate resistance, above which a short-covering episode could lift spot prices to the 0.7055-0.7060 horizontal zone. The latter should act as a strong barrier and cap the upside for the AUD/USD pair, at least for now.
On the other hand, immediate support is now pegged near the daily low, around the 0.6910 area. Some follow-through selling below the 0.6900 mark will reaffirm the short-term bearish bias and pave the way for further losses. The AUD/USD pair could then accelerate the downward path to the intermediate support of 0.6840-0.6835 en route to 0.6800.
AUD/USD daily chart
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Technical levels
Source: Fx Street
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