- AUD/USD pulled back from three-and-a-half-week highs hit on Tuesday.
- The risk-off drive weighed on the risk-sensitive aussie amid a resurgence in dollar demand.
- A sustained break below 0.7100 is needed to support further loss prospects.
The pair AUD/USD saw a modest retracement from 3 1/2 week highs, levels just above 0.7200 touched earlier this Tuesday, paring back a major chunk of overnight gains. The pair maintained its offered tone in the early American session and fell to a fresh daily low, closer to 0.7150 in the last hour.
Comments from Federal Reserve Governor Christopher Waller, coupled with a sharp rise in US Treasury yields, helped the US dollar post a strong rebound from its one-month low. Aside from this, the worsening global economic outlook and risk-on pushed the safe-haven dollar further and put some downward pressure on the risk-sensitive Aussie.
Despite the negative factors, the AUD/USD has so far managed to hold above the 38.2% Fib retracement level of the 0.7662-0.6829 decline. This is followed by the confluence support at 0.7130, comprising the 200-period SMA on the 4hr chart and the lower bound of a rising channel extending from last year’s low hit earlier this month.
As the technical indicators on the daily and 4-hour charts continue to hold in positive territory, the situation favors bullish traders and supports the prospects for some buying in the market. That said, a convincing break of the aforementioned confluence support will nullify the positive outlook and shift the bias in favor of bearish traders, triggering some technical selling.
Follow-up selling below 0.7100 will reaffirm the bearish bias and drag price down to support at the 23.6% Fibonacci level, near the 0.7025-0.7020 region. The next relevant support lies near the key psychological level 0.7000, below which the AUD/USD could drop towards the 0.6940 zone heading towards 0.6900 and the 0.6830-0.6825 region, or a recent years low.
On the other hand, a sustained move beyond the 0.7200 round figure is likely to face resistance near the 100-day SMA around the 0.7235-0.7245 region. Such a barrier coincides with the 50% Fibonacci level and is closely followed by the 200-day SMA, near the 0.7260 area, which if breached would be considered a new trigger for bullish traders and pave the way for further gains.
AUD/USD 4-hour chart
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Technical levels
Source: Fx Street
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