AUD/USD Price Analysis: Descending channel resistance continues to act as a limitation

• AUD/USD reversed an intraday drop to 0.6800 amid a modest intraday pullback in the USD.
• The upside remains capped by resistance marked by the top of a descending channel.

The pair AUD/USD attracted some buying near the 0.6800 mark on Friday and has now recovered modest intraday losses. The pair was last seen in neutral territory around the 0.6830 area as traders await the release of monthly US employment data for further momentum.

The US dollar gave back much of its intraday gains to hit a new two-decade high amid some repositioning ahead of the NFP report. Aside from this, the generally positive tone in equity markets undermined the safe-haven dollar and offered support to the risk-sensitive Aussie.

Technically, the AUD/USD has so far failed to capitalize on this week’s rebound from a two-year low and the upside remains capped near a downtrend channel resistance. This barrier, currently around the 0.6855-0.6860 region, should now act as a point of support.

It is closely followed by the 0.6900 level, which coincides with the 100-period SMA on the 4-hour chart, which if breached would suggest that the AUD/USD pair has formed a bottom. This in turn could trigger a short covering move and lift the pair towards the 0.6955-0.6960 supply zone.

On the other hand, the 0.6800 level seems to have emerged as immediate support, below which the AUD/USD pair could retrace to the 0.6765-0.6760 zone. A bit of follow-through selling would pave the way for a drop to ascending channel support, currently around the 0.6715-0.6710 area.

A convincing break of the latter, leading to a further drop below 0.6700, would be seen as a further trigger for bearish traders and pave the way for further losses. The AUD/USD pair could then accelerate the decline towards the next relevant support near the 0.6655-0.6650 region.

AUD/USD 4-hour chart

Technical levels