- AUD/USD rose for the second day in a row on Wednesday amid sustained USD selling.
- The rally lacked bullish conviction and remained capped near the yearly high set earlier this month.
- The bulls are now waiting for a sustained advance in an ascending channel that extends from levels below 0.7000.
The pair AUD/USD built on the previous day’s nice bounce from near 0.7450 and rose for the second day in a row on Wednesday. The pair maintained its modest intraday gains during the early American session and was last seen trading around the 0.7520 region, just a few pips below the yearly high hit earlier this week.
Looking at the bigger picture, the AUD/USD pair has been oscillating in a familiar trading range for the last week or so. Given the recent strong recovery of over 500 pips from levels below 0.7000, this could still be classified as a bullish consolidation phase. Also, the formation of an upward sloping trend channel adds credence to the constructive setup.
However, the upside remains capped near the 0.7555 region, which marks the October 2021 high. Such area coincides with the upper end of the aforementioned channel extending from the yearly low set in January and should act as a point of pivot. Sustained strength beyond will be seen as a new trigger for bullish traders and pave the way for further short-term gains.
The AUD/USD pair could then accelerate momentum and aim to reclaim the 0.7600 level for the first time since June 2021. That being said, the technical indicators on the daily chart have moved on the verge of entering overbought territory. This makes it prudent to wait for further short-term consolidation or a modest pullback before placing aggressive bullish bets.
Meanwhile, weakness below 0.7500 could continue to find decent support near the 0.7455-0.7450 region. A convincing drop below could trigger a prolonged reversal trade and make the AUD/USD pair vulnerable to accelerate the corrective decline towards 0.7400. The drop could extend into the very important 200 day SMA around the 0.7300 round figure.
AUD/USD daily chart
Additional technical levels
Source: Fx Street
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