Falls to daily lows near 0.7380

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  • AUD / USD is witnessing a modest pullback on Monday from near multi-week highs.
  • Renewed USD demand and softer risk appetite put pressure on the higher perceived risk AUD.
  • A mixed media setup warrants some caution before opening aggressive directional positions.

The AUD / USD pair has struggled to capitalize on its modest initial gains to the 0.7435 region and has witnessed an intraday turn from near the five-week highs hit on Friday. The corrective pullback has extended during the European session and has dragged the pair below the round level of 0.7400.

The drop is due to a good pickup in demand for the US dollar, bolstered by a further rise in US Treasury yields. This, coupled with a softer risk tone and disappointing Chinese GDP, has further benefited the safe-haven USD and helped to push away the perceived riskier Australian dollar cash flows.

Looking at the technical picture, the AUD / USD has struggled to find acceptance or take advantage of momentum beyond the 100-day SMA. This follows the formation of an indecision Doji candle on Friday and suggests that the recent strong positive move from monthly lows may have run out of steam.

The outlook is bolstered by the fact that the technical indicators on the 1-hour chart have been gaining positive traction. That said, the oscillators on the daily and 4-hour charts, while losing some traction, are still in bullish territory. This, in turn, warrants some caution for aggressive bears.

Therefore, it will be prudent to wait for a strong follow-up sell before confirming that the AUD / USD pair has found a short-term high and positioning for any significant bearish moves. Therefore, any subsequent decline is likely to find decent support near the lower bound of a short-term rising channel.

The latter is currently near the 0.7370 region, which if decisively broken could accelerate the slide towards the strong horizontal resistance breakout point at 0.7320-15. Some continuation selling could lead to subsequent weakness below the 0.7300 level, which will set the stage for deeper losses and make the AUD / USD pair vulnerable.

On the other hand, any significant move above the 0.7400 level could continue to face stiff resistance near the 0.7435-40 region. A sustained force above this region should push the AUD / USD pair towards the September monthly highs around the 0.7475-80 region before the bulls aim to regain the key psychological level of 0.7500.

AUD / USD daily chart

AUD / USD technical levels

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