AUD / USD retraces from two-week highs and dips below 0.7650

• AUD / USD is witnessing an intraday turn of around 40 pips from the two-week highs.
• A modest pickup in demand for the USD is considered a key factor putting some pressure on the pair.
• Repeated failures at higher levels support prospects for a further short-term decline.

The pair AUD / USD is down nearly 40 pips from two-week highs and has fallen to fresh daily lows, around the 0.7640-35 region, at the start of the European session on Wednesday.

The pair had built on the previous day’s bounce from near the 0.7600 level and it moved higher during the early part of trading action on Wednesday. The rally, however, lacked subsequent buying and quickly petered out near the 0.7675 region. amid the surge of some buying around the US dollar.

The USD has found some support in a softer risk tone in equity markets and has seen a modest rally from the two-week lows. The optimistic outlook for the US economy continued to prop up the dollar, although a further downward movement in the US Treasury could limit any further gains, at least for now.

Investors have remained optimistic about the prospects for a US economic recovery relatively faster in the pandemic, thanks to the impressive rate of vaccination against the coronavirus. This, coupled with US President Joe Biden’s $ 2 trillion infrastructure spending plan, has been fueling speculation about a spike in US inflation.

This, in turn, has raised doubts that the Fed would keep interest rates ultra-low for a longer period. That said, the market now seemed to push back expectations that the Fed will tighten its monetary policy earlier than anticipated, which has turned out to be a key factor dragging down US bond yields across the board.

Therefore, the key focus of attention will remain Wednesday’s release of the minutes of the last FOMC meeting, which will be presented during the American session. Aside from this, Fed Chairman Jerome Powell’s scheduled speech on Thursday will play a key role in influencing short-term USD price dynamics and could generate further directional momentum to the AUD / USD pair.

From a technical perspective, the pair has again failed near the rising trend line support, marking support for a bearish shoulder-head-shoulder pattern. This validates the negative short-term outlook and supports the prospects for a resumption of the recent retracement decline from the three-year highs, around the 0.8000 level touched on February 25.

AUD / USD technical levels