Recover intraday losses but still not out of the woods

• E AUD / USD is witnessing some intraday selling on Monday, although it lacks continuation.
• Last week’s bearish breakout of a flag pattern supports prospects for further declines.
• Neutral oscillators on 1-hour and daily charts, along with the appearance of some lower-level purchases, warrant caution.

AUD / USD has struggled to capitalize on its initial rally and has encountered new selling near the 0.7775 region, turning negative for the second day in a row on Monday.

A pickup in demand for the US dollar has been seen as one of the key factors that has put some downward pressure on the AUD / USD pair. However, a softer tone around US Treasury yields, coupled with the prevailing risk appetite mood, has limited safe-haven US dollar gains and helped limit additional losses in the pair.

Looking at the technical picture, last week the AUD / USD pair broke below a short-term uptrend channel, which constituted the formation of a bearish flag pattern. That said, the lack of subsequent sales warrants some caution before positioning for any further drops.

The AUD / USD pair has found decent support near the 0.7725-20 region, which should now act as a key point for short-term investors. Sustained weakness below this region will reaffirm the breakout of the flag pattern and set the stage for the resumption of the corrective decline from multi-year highs.

Meanwhile, the neutral technical indicators on the 1-hour and daily charts have not supported any firm short-term direction. This warrants some caution for aggressive investors and makes it prudent to wait for some continuation weakness below the 0.7725-20 support to confirm a bearish bias.

Below the mentioned support, the AUD / USD could become vulnerable to further weaken below the 0.7700 level and accelerate the slide towards the recent daily lows, around the 0.7645 region. The downward move could extend further and drag the pair towards the round 0.7600 level.

On the other hand, immediate resistance is found near Friday’s highs, around the round level of 0.7800. This is followed by a strong barrier near the 0.7835-40 resistance zone, which if decisively overcome will negate any short-term bearish bias and could trigger some short-term short-term hedging movement.

The AUD / USD pair could be heading towards recovering the 0.7900 level before finally launching towards the intermediate resistance of 0.7965-70 on its way to the key psychological level of 0.8000.

AUD / USD 4-hour chart

AUD / USD technical levels