- AUD/USD extended its recent slide and sank to a nearly two-year low on Thursday.
- The retreat in US bond yields capped the USD and helped the pair find some support.
- The setup still favors bearish traders and supports prospects for further losses.
The pair AUD/USD it has managed to recover a few pips from its lowest level since June 2020 and was last seen trading in the 0.6875-0.6880 region, down 0.90% on the day.
The US dollar trimmed some of its intraday gains to a nearly two-decade high amid an extension of the recent sharp drop in US Treasury yields. This, in turn, helped the AUD pair. /USD to find some support near the mid-0.6800 level, though any significant recovery still looks elusive.
Higher-than-expected US consumer inflation figures on Wednesday bolstered bets for more aggressive policy tightening by the Fed. This, coupled with recession fears, continued to weigh on sentiment. investors, which should act as a tailwind for the safe-haven dollar and cap the AUD/USD pair.
From a technical perspective, the sharp overnight pullback from the 0.7055-0.7060 area and subsequent weakness below the previous yearly low around the 0.6910 area signaled a further bearish break. The latter should now act as a strong barrier and limit the AUD/USD pair’s recovery attempt.
Any further moves higher could continue to face resistance yet and meet with fresh supply near the key psychological 0.7000 level. This should act as a key point for short-term traders, which if sold off decisively could trigger a short covering bounce back towards the 0.7055-0.7060 area.
On the other hand, the daily low around the mid 0.6800 now seems to protect the immediate fall. Some follow-up selling will reaffirm the bearish outlook and make the AUD/USD pair vulnerable to extend the downward trajectory to test the next relevant support near the 0.6800 mark.
AUD/USD daily chart
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Technical levels
Source: Fx Street
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